International HRM: A Cross-Cultural Approach

International HRM

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International HRM A Cross-Cultural Approach

Terence Jackson

SAGE Publications London • Thousand Oaks • New Delhi

© Terence Jackson 2002 First published 2002 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted in any form, or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued by the Copyright Licensing Agency. Inquiries concerning reproduction outside those terms should be sent to the publishers. SAGE Publications Ltd 6 Bonhill Street London EC2A 4PU SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320 SAGE Publications India Pvt Ltd 32, M-Block Market Greater Kailash — I New Delhi 110 048 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0 7619 7404 0 ISBN 0 7619 7405 9 (pbk) Library of Congress catalog card number available Typeset by Keystroke, Jacaranda Lodge, Wolverhampton. Printed and bound in Great Britain by Athenaeum Press, Gateshead

To the students and staff who created and nurtured the multicultural spirit and vision of EAP European School of Management 1973–1999 in Paris, Oxford, Berlin and Madrid. Within the School nobody was a foreigner. The dedication is also to the continuation of this spirit within the new school, which combines the youth and optimism of EAP with the wisdom and maturity of ESCP.

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1. The Cross-Cultural Organization: The Multicultural Model Swedish culture and people management – IKEA: managing cultural differences – The multicultural model – Cultural values – Other cultural dimensions – Some reflections on the cross-cultural organization – Spanish culture and work values – People management in Spain – IKEA in Spain – Implications for managers – An agenda for research.

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2. The Strategic Organization: The Supranational Model 37 French culture and people management – Crédit Lyonnais: the internationalization process – The supranational model – Strategies for international organizations – Integration and differentiation – Perlmutter’s model – Implications for human resource management policy – An integrated strategic framework – Crédit Lyonnais revisited – Implications for managers – An agenda for research. 3. The Competent Organization: The American Model Andersen Consulting (Europe) – The American model – Why American theories might not apply abroad – Parochialism and universality – Management competences approach – European and international competences – The cultural regard for managers and their competences – Different degrees of internationalization of companies – Problems inherent within the competences model – Implications for managers: selection of managers and key staff – An agenda for research.

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4. The Missionary Organization: The Dutch Model The Dutch model: the missionary spirit – An American company in the Netherlands – Royal Dutch/Shell – Why expatriation? A strategic perspective – Is expatriation problematic? – Choosing expatriates – Acculturation – Why expatriation? The career perspective – Cultural factors in international career choice – Women and expatriation – Other cultural factors in international career choice – Implications for managers – An agenda for research.

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5. The Motivating Organization: The Japanese Model Corporate commitment – Task, job, career and organizational incentives – Needs, satisfaction and culture – The Japanese model and Matsushita – Japanese people management and Sumitomo Metal Industries – Do Japanese people management work techniques work outside Japan? Chiba International – Implications for managers: reward systems across cultures – An agenda for research.

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contents

Preface Introduction: Beyond Human Resource Management

CONTENTS

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6. The Learning Organization: The British Model The British model – British management culture – British Petroleum – Action learning and the experiential approach – Transferability across cultures – The organizational learning concept – Training and development within a total model – From learning to knowledge: from Britain to Japan – Implications for managers: potential cross-cultural problems with the learning organization concept – An agenda for research: the cross-cultural challenge.

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7. The Flexible Organization: The European Union Model The European model – Digital Equipment Corporation (Europe) – The context of management and organizations in Europe – A European model of people management – Organization and work flexibility – Implications for managers: revisiting DEC (Europe) – An agenda for research.

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8. The Joint Venture Organization: The Chinese Model With Peter Xu Lu* The Blue Sword Group – Chinese work values – International joint ventures in China – Motivation and reward systems in Chinese international joint ventures – Implications for the management of joint ventures – An agenda for research.

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9. The Transitioning Organization: The Post-Soviet Model The post-Soviet model – Volkswagen–Skoda joint venture – German people management – Soviet management and organization – Soviet management in East Germany – Soviet personnel management – Post-Soviet people management – People management in the Czech Republic – Implications for managers: Western companies in Russia – An agenda for research.

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10. The Stakeholder Organization: The Post-Colonial Model The post-colonial model – People management in South Africa – Eskom – AECI Explosives Ltd – Germiston City Council – African people management – Indian people management – Culture and Indian managers – Indian management responses to liberalization – Implications for managers: indigenous knowledge and the stakeholder approach – An agenda for research: post-colonialism and hybridization.

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11. Conclusion: The Future Organization

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References Index

231 249

preface

The term ‘Human Resource Management’, and the concept behind it, is laden with value. Values are part of the fabric of culture. The concept that human beings are a resource to further the executive ends of an organization is a concept that is contrary to the values of many non-Western cultures. Perhaps in its most instrumental conceptualization, this may also be contrary to the values of many ‘Western’ cultures. Certainly the ideas behind what constitute the principles, policies and practices of managing people in organizations differ even among Western European countries, and certainly between American and most Western European countries. Since the origins of the concept in the individualistic achievement-oriented management culture of the United States, the term Human Resource Management is almost universally accepted. Particularly in writing about the management of people, it is very difficult not to use this term, even in the international context within which most managers (barring those who still keep their heads in the sand) now operate, either actively or as passive participants in the global economy. Little thought is given to the implications of its underlying concept, nor to its manifestations in the policies and practices that multinational corporations employ across different countries. Most often these policies and practices are inappropriate. Yet in many countries such as the transitional economies of the former Soviet bloc and the People’s Republic of China, and the ‘post-colonial’ societies that make up a huge percentage of the people and land surface (as well as resources) of the globe, HRM policies and practices are often uncritically accepted, virtually ‘off the shelf’. This is not to denigrate the contributions to global managing that HRM in many of its principles, such as the competences approach, can often make. It is simply to situate it in its cultural context, and to examine its appropriateness in other cultural contexts. It is also to view this in connection with contributions from other cultural sources, as well as the multicultural (centrifugal) and strategizing (centripetal) influences acting on international organization. In particular, Chapter 1 examines the management of people employing a ‘multicultural model’ of conceptualizing differences and differentiation in international organization. Chapter 2 employs an integrative conceptualization of the ‘supranational organization’ to look at how different formulations of international organizational strategy may influence the way cultural differences are handled. Chapter 3 explores the ‘American model’ of the competent organization. The competences approach takes organizational strategic and operational goals as its starting point in determining required competences for selection, development and reward: not least to determine ‘international’ competences. This leads into a discussion of expatriation and international careers, taking the analogy of the ‘missionary organization’ and the metaphor of the ‘Dutch model’. Chapters 5 to 10 look at the ‘cultural’ contributions of different approaches to the management of people in international organizations. Chapter 5 looks at the ‘Japanese model’ of the motivating organization, extending the concept of

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motivation to include loyalty, and examining the transferability of Japanese techniques to other countries. Chapter 6 focuses on the concept of the learning organization through the cultural lens of the ‘British model’. Not all learning organizations are British, yet the British cultural setting is discussed as it is particularly conducive to the development of such a concept. This concept has been bounced back and forth across the Atlantic Ocean, and more recently has incorporated concepts of knowledge management including those from Japan. The ‘flexible organization’ could perhaps be relevant anywhere in the world, yet geographical as well as temporal flexibility has been especially important to developing trans-European organizations within the European Union. The European Union model is discussed in Chapter 7 as attempting to draw synergies from diversity, rather than glossing over cultural differences in the management of people in international organizations. That need for flexibility has extended to organizations and managers working more and more in joint ventures. This is no less so than in China, where because of the way foreign companies were allowed into mainland China, international joint ventures have been the norm. The ‘Chinese model’ is examined in Chapter 8, particularly in terms of the crossvergence of management systems (i.e. the developing of hybrid value systems as a result of cultural interactions) and the problems involved in Western–Chinese joint ventures in relation to managing people. Both these themes are taken up in connection with the ‘transitioning organization’ within the ‘post-Soviet model’ in Chapter 9. The appropriateness of German approaches to people management in joint ventures with former Soviet bloc countries is a particular focus, as are the management systems emerging from the remnants of Soviet systems of management and control. Many of the issues that confront countries in transition also confront the post-colonial countries of Africa and South Asia. Chapter 10 focuses on the ‘post-colonial organization’ within a ‘stakeholder model’, and looks at the humanistic regard for people, in contrast to the instrumental one of many Western companies operating in post-colonial countries. This is a book primarily for advanced students, including those on MBAtype courses taught in English around the globe. It is for students and managers of international management and ‘human resource management’ in an international context. On such courses there is a major problematic of maintaining and conveying a high level of academic rigour, while ensuring that the theories and material are relevant to the day to day decision-making activities of real managers doing real and demanding jobs. The approach of this book is to discuss issues as far as possible within the context of real companies and real cultures. Each chapter therefore provides a real-life case or cases. Each chapter also provides, by way of conclusion, a section on management implications together with sample questions that will help readers to draw conclusions from the cases, and a section on developing a research agenda. It is hoped that this will be useful for readers who are developing research projects and writing dissertations in these particular areas, and sample questions are provided. These may help in formulating specific research questions. The text does not aim to be comprehensive in coverage in terms of industries, but to illustrate the activities and approaches of international organizations. Also, the coverage of different cultures is not intended to include all the different and diverse cultures of the world, simply to enable sufficient understanding of the cultural contexts from which many of the approaches are

PREFACE

derived, and to provide background on the appropriateness of different aspects of managing people in international organizations. A conceptual map at the end of this preface should help readers navigate through the chapters. It is further discussed in the Introduction. Terence Jackson Centre for Cross Cultural Management Research, ESCP-EAP European School of Management

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Managing differentiation and integration

A conceptual map of international organization and human resource management

LINKAGES

The Cross-cultural Organization Managing differentiation in the management of people

Managing integration in the management of people

Reconciling instrumental and humanistic perceptions of people

Managing cultural difference across borders

The Strategic Organization Managing integration

The Competent Organization Managing ‘Human Resources’

IKEA

International Operations

FRENCH

Crédit Lyonnais

AMERICAN

(3: The American Model) Selecting & developing expatriates

The Missionary Organization Managing expatriation

American German French

Operations

(2: The Supranational Model)

Selecting and developing international personnel

SPANISH

SWEDISH International

(1: The Multicultural Model)

International Operations

EUROPE French British

Andersen Consulting

DUTCH (British) (American)

International Operations

Human resource planning Transferring appropriate people management Motivating and managing people across cultures Integrating indigenous knowledge Managing transfer of learning and knowledge across cultures

(4: The Dutch Model)

The Motivating Organization

Royal Dutch/Shell European International Operations American

JAPANESE

Managing commitment (5: The Japanese Model)

The Learning Organization

Sumitomo Metal

Chiba

BRITISH

Off-shore Operations

Managing knowledge (6: The British Model)

American Japanese

BP

Developing a crosscultural learning organization Managing organization and work flexibility

The Flexible Organization Managing lateral and temporal flexibility

European Union

EUROPEAN American

(7: The European Union Model)

DEC (Europe)

Managing lateral flexibility Managing foreign managers and indigenous workforces

The Joint Venture Organization Managing differences through international alliances

CHINESE

WESTERN IJVs

(8: The Chinese Model)

Belgian

Blue Sword Group

Transferring knowledge through joint ventures Managing transfer of HRM systems

The Transitioning Organization Managing knowledge transfer (9: The Post-Soviet Model)

Developing a stakeholder approach Developing hybrid people management systems

The Stakeholder Organization

POST-SOVIET GERMAN

Western

Czech Russian

Volkswagen-Skoda

WESTERN

AFRICAN South African

Managing indigenous values American

(10: The Post-Colonial Model)

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Illustrative cultural interactions

Realizing operational goals

Managing international careers

Developing a stakeholder approach

CONCEPTS (chapters)

Eskom, AECI, City Council, Colgate Palmolive

Indian

Avoiding disasters On 6 March 1987, the Herald of Free Enterprise, a roll-on/roll-off passenger and vehicle ferry, capsized and sank in five minutes off the coast of Zeebrugge, Belgium, with the loss of 193 lives. The incident was caused by a combination of factors, including the actions or lack of actions of both line staff and senior management. The report of the formal investigation allocated responsibilities for the disaster among the top management, including the board of directors and the junior superintendents. The disaster’s immediate cause was the ferry’s having put to sea with the bow doors open. The assistant bosun had opened the doors. He acknowledged it was his duty to close them. He had previously been released from duty by the bosun, fell asleep and had not been woken by the call of ‘harbour stations’. But, although the assistant bosun was nominally in charge, he was not the only person in charge, and not the only person who ever closed the doors. There was no clear system. The system of checking the doors was the responsibility of the chief officer, but the system required him to be in two places at the same time: checking the bow doors and taking up his position on the bridge. The bosun was the last person to leave the area of the bow doors and could have closed them. He said that it had never been part of his duties to close them. Nor did the Master of the vessel check with the chief officer if the ship was secure when he came onto the bridge, and the chief officer did not make a report to that effect. The standing orders of the company were that ‘Heads of departments are to report to the Master immediately they are aware of any deficiency which is likely to cause their departments to be unready for sea in any respect at the due sailing time. In the absence of any such report the Master will assume, at the due sailing time, that the vessel is ready for sea in all respects’. This therefore accepts that negative reporting is sufficient to count for a positive information transmission. That is, no report is considered to convey positive information. So if there is a failure to make a report for other reasons, the wrong communication may be transmitted. This does not give the Master any responsibility to request the information: absence of information is regarded as sufficient to put to sea. This does not, however, preclude bottom-up responsibility. Whilst standing orders were interpreted so that no checks were made on whether the bow doors were actually closed or not, managers (e.g. the bosun) could also be held responsible for not questioning these ambiguous orders and the interpretations of these orders by senior managers (captain and superintending captain).

introduction

Introduction: beyond human resource management

INTERNATIONAL HRM

It is Allinson (1993) who recounts this disaster. He suggests that it may be understood in terms of dysfunctional management: there was a total lack of safety priority for crew and passengers; a non-assignment of responsibilities and issuing of unclear orders; an apparent lack of ethical consciousness and lack of understanding of the responsibilities of a manager; and a lack of proper management structure. Allinson suggests that a safety-first consciousness could have been implemented by a clear attribution of domains of responsibilities for specific officers; by issuance of clear orders and instructions; by safety not being seen to be an add-on, but an intrinsic feature of good business management; by shared responsibility (perhaps bottom-up and horizontally as well as top-down); and by the will to communicate, including respectful listening. A similar disaster had been averted in 1983 when the assistant bosun of the Pride of Free Enterprise had fallen asleep. Some masters had requested a light on the bridge to indicate that the door had been closed. These requests were ignored until after its sister ship Herald went down. Allinson focuses on this, and on other major disasters: the launch of the Challenger space shuttle, the King’s Cross underground station fire in London, and the crash of the Air New Zealand DC10, flight TE 901 on Mount Erebus. He concludes that above all management ethics is a respect for persons. He suggests that applying some of the principles that appear to pertain in Japanese management systems might have led to the avoidance of technological disasters. These include intra-departmental cooperation, for example, between the manager (who may see her job as cost cutting and therefore safety cutting) and the engineer (who may propose safety features); and the understanding that one dissenting voice can stop disasters (the will to communicate: in such as the ringi system). One of the main messages that Allinson (1993) conveys is that people should be treated as an end in themselves, and not as a means to an end. It seems to have been the practice of such ferry companies to maximize returns by turning ferries around as quickly as possible (similar disasters have taken place more recently, such as the ferry Estonia capsizing in the Baltic Sea with the loss of many lives). Other stakeholders, apart from shareholders such as staff and customers, were not given due attention, and hence safety was disregarded. They were simply seen as a means to an end.

Human resource management and beyond

2

Instrumental attitudes to people in organizations do not always lead to disasters, although they have the potential to do so in certain combinations of circumstances. However, contained within any managerial decision making are attitudinal values that can determine the outcome of decisions. Decisions that managers make in organizations can affect people’s lives. The importance of the contribution to the bottom-line and to shareholder value is a key issue in many Western-based human resource management systems (Becker et al., 1997). Yet the underlying values basis for this approach may become a major impediment to the successful transfer of management policies and practices internationally. The cultural perception of human beings as a resource used in the pursuit of shareholder value may be challenged by the perception that

INTRODUCTION: BEYOND HUMAN RESOURCE MANAGEMENT

people have a value in their own right (Jackson, 1999). Hence, a developmental approach towards people, as an integral part of the organization, and as a direction of its objectives, may be implicit within, for example, Japanese approaches to managing people (Allinson, 1993). Certainly since Allinson’s book was published there has been an increasing emphasis in Western literature on the stakeholder approach to managing organizations, and a hard instrumental approach had already been challenged in a limited way within the context and conceptual framework of Western human resource management (Legge, 1989; Ellig, 1997). A distinction has been made in the strategic human resource management literature between the ‘hard’ perspective reflecting utilitarian instrumentalism which sees people in the organization as a mere resource to achieving the ends of the organization, and the ‘soft’ developmental approach which sees people more as valued assets capable of development, worthy of trust, and providing inputs through participation and informed choice (Beer and Spector, 1985; Tyson and Fell, 1986; Hendry and Pettigrew, 1990; Storey, 1992; Vaughan, 1994). Yet Tayeb (2000) quite rightly states that the concept of human resource management is itself a product of a particular Anglo-American culture. It is likely that the ‘hard’ and ‘soft’ approaches taken within Western organizations both reflect an inherent cultural concept that perceives human beings in organizations as a means to an end (Blunt and Jones, 1997, uses the term ‘functionalism’). They are simply two poles of a continuum from high to low instrumentalism. If managers and human resource professionals are unable to break out of this paradigm, it is likely that when they, or managers educated in the Western tradition, try to implement ‘Western’ human resource practices in cultures which have a different concept of people, and a different regard for people in organizations, then incompatibilities will be manifested in lack of motivation and alienation, leading to low productivity and labour strife. This is of particular importance because of the extent of internationalization (see Chapters 2 and 4 below). The importance of cultural values to the conduct of organizational life is well established in the literature (this is explored in more detail in Chapter 1). Yet the way that cultural values influence the regard for people in organizations, whilst implicit in the cross-cultural values literature, has been insufficiently articulated. There is, in particular, a growing interest in the relationship between indigenous and foreign (mainly Western) cultures in the practice and development of management and organization in the transitional economies of the former Soviet bloc (Shekshnia, 1998; Koubek and Brewster, 1995; Lawrence, 1994; and Chapter 9 this text), in China (Wang, 1994; Sergeant and Frenkel, 1998; Jackson and Bak, 1998; Huo and von Glinow, 1995; and Chapter 8) and to a lesser extent in the socalled ‘developing’ countries of South Asia, Africa and Latin America (Jaeger and Kanungo, 1990; Blunt and Jones, 1992; and Chapter 10). These issues have also been explored in the newly industrialized countries of East Asia (Chen, 1995; and Chapter 5), as well as in the ‘hybrid’ East/West cultures of the economies of Hong Kong (Priem et al., 2000) and Singapore (Gill and Wong, 1998; and Chapter 8). This literature by and large challenges the assumptions upon which human resource management is based in the Western world, and its applicability to managing people in countries whose economies have more recently been launched into the global market place.

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INTERNATIONAL HRM

The differences in perspectives on the value of people in organizations, and the validity of human resource management, particularly in non-Western countries, may be best understood in terms of the concept of locus of human value.

Locus of human value

4

It is possible to define ‘humanism’ as a regard for people as an end in themselves, and as having a value in themselves within an organizational context. Hence the locus of value, or the worth attributed to persons in a work organization is orientated towards those persons in themselves rather than towards organizational objectives as appropriate ends (for conceptual roots see Jackson, 1999; Koopman, 1991; Lessem, 1994 and Saunders, 1998). ‘Instrumentalism’ is defined as a regard for people as a means to an end, where the locus of value or the worth attributed to persons is towards the ends (objectives) of the organization. Conceptually it may be tempting to subsume ‘instrumentalism-humanism’ under an individualism–collectivism dimension. There seems to be a simple split between the individualistic Western cultures where individuals are brought up in nuclear families and where individual achievement is often stressed, and collectivistic non-Western cultures where people are more likely to be part of an extended family and group involvement is stressed (see Chapter 1). The lifetime protection of people which collectivism affords would seem to indicate a valuing of people in their own right, and as part of a collective. The expectation that people in individualistic cultures will look after themselves (Hofstede, 1980a) would indicate a more instrumental view of people in organizations. Confounding this simplistic view is first the target-specific and obligatory nature of collectivism (Hui, 1990). Japanese men may be more psychologically involved with their organizations, and Chinese more involved with their families, but at the expense of those outside the collective. Hence those outside the in-group may be regarded instrumentally. Secondly the work of Schwartz (1994) and Smith, Dugan and Trompenaars (1996) contrasts ‘conservatism’ and ‘egalitarian commitment’: the former correlating negatively with Hofstede’s (1980a) individualism, and the latter correlating positively with it (these concepts are dealt with specifically in Chapter 1). Whilst the socio-centric values attached to ‘conservatism’ are those that would be expected to be associated with collectivism, ‘egalitarian commitment’ expresses a transcendence of selfish interest (loyalty, social justice, responsibility and equality: Schwartz, 1994), but places a voluntary aspect on this rather than an obligatory one towards the in-group. It may be that instrumentalism and humanism do not relate in a direct way to the level of individualism and collectivism in a society, as there may be different propelling cultural influences in different societies that lead to a diminution of a humanistic locus of human value within the organization and/or a softening of an instrumental locus. For example, Australia is an individualistic (Hofstede, 1980a), ‘Western’ culture, yet has also been seen as having a ‘humanistic’ orientation (England, 1975, 1978) which Westwood and Posner (1997) argue leads to a concern for the well-being of the workforce and for quality of work life. More accurately this may reflect a moderately high level of egalitarian commitment (Schwartz, 1994,

INTRODUCTION: BEYOND HUMAN RESOURCE MANAGEMENT

Smith et al., 1996) and the ‘mateship’ of Australian society often identified in the literature (Encel, 1970). More recent research has suggested that Americans are not as individualistic as Hofstede’s (1980a) study has suggested (Bond et al., 2001). This view is reflected in the moderately high scores on Schwartz’s (1994) and Smith et al.’s (1996) egalitarian commitment (see Chapter 1). Yet with Australia’s higher historical levels of protectionism of both business and of the labour market, American work culture may be expected to exhibit a higher level of achievement orientation than that of Australia. However, both countries have similar moderately high scores on Hofstede’s (1980a) masculinity dimension, which in part measures the level of competitiveness and results focus, and Australia has more recently gone through a phase of economic liberation and increase in competitiveness and freer labour markets (Edwards et al., 1997; Tixier, 2000; Boxall, 1999). Both Australian (Karpin, 1995) and American (Wheeler and McClendon, 1998) organizations have been shown to have a command and control orientation with a top-down management approach. Again this may be a factor which promotes the view that employees may be used instrumentally towards the objectives of the organization’s executive. Yet there are other reasons, apart from the recent conceptualization of ‘egalitarian commitment’ in the cross-cultural values literature, why the harder forms of instrumentalism are being modified and ‘softened’ in the Anglo-Saxon countries and probably also in Western Europe; but also why the ‘harder’ versions may be being adopted uncritically in the rather short-term orientation of transitional countries in the former Soviet bloc (see Chapter 9), and in the newly industrialized countries of East Asia (see Chapter 8). Influences from both cross-vergence of cultural systems (for example, the continued influence of Japanese policies on Western management thought and practices since the time of Pascale and Athos’ 1981, and Ouchi’s 1981, groundbreaking work), and the maturity of HRM systems under these and Western ‘indigenous’ influences such as human relations theory (from Roethlisberger and Dickson, 1939 and Likert, 1961), may give rise to the ‘softer’ instrumentalism in terms of policy and practice manifestation. Similarly, with cross-vergence operative on ‘hybrid’ management cultures such as that of Hong Kong (a study of cross-vergence in Hong Kong by Priem, Love and Shaffer, 2000 found Hong Kong respondents to be closer to those from America than respondents from Guangzhou in their values), a humanistic locus of human value in organizations may take on ‘harder’ manifestations, or instrumental approaches to managing people may also feature. For example, Hui (1990) notes the differential treatment of employees of in-group members and out-group members in Chinese family firms as conceptualized by McGregor’s theory Y and theory X respectively. Hong Kong society is culturally complex, having been at the interface of Eastern and Western society for many years. The evidence in the literature in terms of its level of individualism–collectivism and the way it is changing is contradictory (Ho and Chiu, 1994; and see Chapters 1 and 8). Hence, as a result of both cross-vergence (Priem et al., 2000), and differential treatment of employees within a ‘hybrid’ collectivist management, both instrumentalism and humanism will be modified by the influence of the other.

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The influence of instrumentalism on transitional and newly industrialized countries should also be taken into account (see Chapters 8 and 9). For example May, Bormann Young and Ledgerwood (1998) identify in Russia a tendency of corporations to adopt uncritically imported HRM solutions, stating that there is an underestimation of the complexities of the free market economy in the context of the Russian situation. They also note the lack of commitment to the organization, a lack of managerial responsibility, disregard for health and safety issues, and strained labour–management relations. This would seem indicative of a high level of instrumentalism. Srica (1995) also indicates that this may be the case in Eastern and Central European post-Soviet countries. Yet countries such as the Czech Republic and Poland, which historically are different from Russia, have traditions of pre-Soviet industrialization and entrepreneurship, and relative efficiency under the Soviet system (Koubek and Brewster, 1995). They may be far closer to Western Europe than Russia in their cultural orientation, yet suffer from a lack of maturity of their ‘HRM’ systems. Russia also has a stronger tradition of collectivization, and perhaps even ‘Asiatic’ humanistic orientations, than Poland and the Czech Republic. In Smith et al.’s (1996) conservatism–egalitarian commitment dimension, Russia is much higher on conservatism and lower on egalitarian commitment than Poland. The newly industrialized countries in East Asia are also likely to come under the influence of the older industrialized countries to adopt short-term measures that have been successful elsewhere in order to compete effectively in the global economy. In the case of Korea (and distinguishing it from the transitional countries of the former Soviet bloc) these may be influences from both Japanese models of industrialization as well as from American models (Chen, 1995). Bae and Chung (1997) have shown Korean organizations to be different from those of Japan in terms of the level of solidarity shown towards co-workers (see Chapter 5). Although Korean employees expect a higher level of commitment from their companies towards them, and from them to the company, the corporation shows a lower level of solidarity with workers than either their Japanese or their American counterparts. Chen (1995) depicts Korean people management as less consultative than that of Japanese firms, and as having a lower loyalty downwards, yet with loyalty expected upwards, and as representing a more authoritarian system than that of Japan. Hard instrumentalism may therefore be a feature in the newly industrialized countries of East Asia as well as of transitional countries. However, there will also be humanistic influences on such countries. If organizations are regarded as fulfilling collective social needs such as providing full employment (as in the case of the former Soviet bloc: Koubek and Brewster, 1995), or serving the needs of people as part of a collective in-group (as in the case of Japan and Korea: Chen, 1995), this may be reflected in the extent to which people see their organization as fulfilling the needs of its people. A perception of contractual obligations only within individualistic societies may militate against this type of view. In a society with such collectivistic socio-cultural values, individuals may be valued as part of the wider collective. This may be different from the values implicit within ‘egalitarian commitment’ and the ‘human relations school’ in Western society where a consideration of the ‘valuing’ of people may still be oriented towards a particular end that is separate from the individual. In a collectivist society, the ‘end’ may not be separate

INTRODUCTION: BEYOND HUMAN RESOURCE MANAGEMENT

from the individual. It may also be that the relationship between the cultural antecedent of collectivism and a humanistic locus in organizations is more straightforward than the relationship between individualism and instrumentalism. Managers in Japan, Korea and Hong Kong in Smith et al.’s (1996) study are all relatively high in loyal involvement on the dimension utilitarian involvement/loyal involvement. This is a dimension associated with individualism– collectivism, and it contrasts a contractual involvement with a moral involvement with the organization (see Chapter 1). The difference noted in the literature between the lower loyalty of the Korean corporation and the higher loyalty of the Japanese corporation has already been discussed. This may impact on the extent that managers regard employees as having a value in themselves. Unlike in other collectivist cultures, such as India (Rao, 1996) and Africa (Jackson, 1999; Blunt and Jones, 1992; and Chapter 10), Japanese corporations have been successful in harnessing societal collectivism to the corporation, by ‘utilizing social and spiritual forces for the organization’s benefit, and in accepting the responsibilities to their employees’ (Pascale and Athos, 1981: 25). Although people management practices emanating from this (e.g. lifetime employment, payment by seniority) have come under increasing pressure (Chen, 1995), there still seems to be a people and relationship focus that is important in obtaining employees’ moral commitment to the organization (Gill and Wong, 1998). This relationship focus is also found in Chinese business organizations where familial relations are important both internally and in guanxi relations or personal connections or networking in business dealings (Chen, 1995). Although there are differences in the ways corporations capture this societal collectivism in people identifying with the corporation and the corporation identifying with its people, the mindset or locus of human value is still likely to be humanistic in a collectivist society. Where corporations cannot or do not harness this, alienation is likely to ensue between people’s ‘home’ culture and the alien culture they step into when they go to work in the morning.

Implications for human resource management Despite the complex socio-cultural antecedents to these concepts of people in organizations, an understanding of the way people are seen, and see themselves, in organizations, is fundamental to effective people management across different cultures. This is particularly relevant to management in transitional and newly industrialized economies where conflicts between indigenous and foreign practices (based on conflicting views of human beings) may come to the fore. A premise in this is that there are inherent tensions between an instrumental locus and a humanistic locus of human value that are manifested differently in different cultures. The contradiction between life outside and inside the world of work organizations has been investigated in various guises since the Industrial Revolution in the West: from the concept of alienation in the Marxian literature through to Etzioni’s (1975) concepts of moral, calculative, compliant and alienative involvement (see Chapter 5). Organizations in different cultural settings may have different responses to this contradiction: from the calculative/contractual responses of American

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8

HRM systems (see Chapter 3) which recognize and work within the instrumental relationship between employer and employee (attempting to humanize this through quality of work life initiatives and employee involvement, whilst firmly focusing on the bottom-line: Ellig, 1997; Ehrlich, 1997), to the moral, spiritual (Pascale and Athos, 1981) and obligatory responses (such as creating an internal labour market: Chen, 1995) of traditional Japanese organizations which capture the collectivistic and humanistic orientations of the wider society (see Chapter 5). There seems little doubt that between these different approaches, which have been represented here as humanism and instrumentalism, policies and practices are being shared across cultures through the processes and activities of firms who are internationalizing using different types of strategies (see Chapter 2), and expatriates’ activities and functions in host countries (see Chapter 4). This may not be through convergence (the coming together of value systems), but by cross-vergence (developing of hybrid value systems as a result of cultural interactions: see for example Priem et al., 2000). Hence raw Taylorism with high levels of control may not be a feature of the mature HRM systems in, for example, the United States as a result of the influences discussed above, but may be evident in the policy manifestations of organizations in Russia and other post-Soviet countries. Lawrence (1994) identifies in the post-Soviet system a move towards greater efficiency, higher workforce discipline, less paternalism and more instrumentalism and a decline in human contact, while Srica (1995) notes a shorttermism and deterioration in employee–manager relations (see Chapter 9). In HRM practice this means borrowing from the West. Hence in Russia Shenkshnia (1998) notes that HRM systems are built more explicitly around business objectives, with formal systems of staffing, career planning, management development, skills training and appraisal systems with Management by Objectives (MBO). This may also be evident in policy manifestations in Korea. For example, Chen (1995) notes that Korean workers put a strong emphasis on extrinsic rather than intrinsic factors of motivation, and some organizations have MBO systems and focus more on wages and conditions, with performance being seen as an important factor. Yet there is retention of seniority systems. Appraisal systems for formally assessing performance are also represented, but include other considerations apart from performance, and an emphasis on harmony militating against negative judgements, and reflecting tolerance and appreciation of people’s best efforts (Chapter 5). The manifestations of an instrumental locus are best explained by the competences approach to human resource management (see Chapter 3). Constable (1988) following Boyatzis’ (1982) definition of a skill defines competence as ‘the ability to demonstrate a system or sequence of behavior as a function related to attaining a performance goal’. As such the required competences are determined by operational objectives, which are related to strategic objectives, and link the various human resource functions such as selection, training and reward, in seeking organizational objectives (Jackson, 1991). An instrumental locus is also underpinned by a systems concept of organization (Silverman, 1970), where people (as resources) are organized in the best way, and have the best skills, to ensure efficient throughput in the system. For example, job descriptions would identify appropriate persons for particular positions within the system, ensuring that they had the required competences.

INTRODUCTION: BEYOND HUMAN RESOURCE MANAGEMENT

This may be one of the more fundamental implications and manifestations of an instrumental locus of control, which may predominate although certain features of a ‘softer’ instrumentalism (e.g. quality of work life) may resemble features of a ‘harder’ humanism. This may be an appropriate response of HRM policies with the aim of obtaining higher levels of mutual contractual involvement of employees in cultures that exhibit an instrumental locus of human value. In cultures that have a humanistic locus of human value, the development of a moral commitment may be more appropriate. Hence Japanese firms may exhibit a higher commitment to people and community welfare by retaining (ingroup) employees through economic downturns, which in turn encourages stability, commitment and a sense of belonging (Gill and Wong, 1998; Beardwell, 1994). This element of social welfare and responsibility was also exhibited in the Soviet countries, which also gained the commitment of workers through ideological means (Kornai, 1992; Koubek and Brewster, 1995; and Chapter 9). However, it is likely that the two systems diverge on the level of commitment to developing people, although the same opportunity may have presented itself through longer term planning and a lack of pressure from shareholders in the case of Japan (Chen, 1995) and the Soviet economy (Kossov and Gurkov, 1995). Rather than a competences approach which links individuals into the operational and strategic objectives of the organization, a developmental approach, based on job flexibility and rotation (rather than fitting a person to a job) and promotion based on experience through seniority (Kuwahara, 1998), seems to reflect a more holistic approach to the person. The organization, and experience within this, is geared to developing the person as a committed part of the human organization. The concept of locus of human value may therefore be helpful in understanding an inherent contradiction between the world outside work organizations and life inside. The differing attempts at reconciling these two worlds, and the possible effects of cross-vergence through global cultural interaction, may bring the two loci into conflict or contradiction. Yet they may meld into a hybrid people management system. Through cross-vergence, management systems may be borrowed and adapted, rather than the cultural orientations of those being managed substantially changing. It is the managers from emerging and transitional economies who are trained and influenced by Western traditions, rather than the workers who staff the enterprises. Similarly, the literature on international and comparative HRM practices in different countries reflects those policies and practices being introduced, rather than telling us very much about how employees react to such policies, and how successful they might be in the long term. The wholesale adoption of Western HRM methods in Russia for example may ultimately be ineffective as an inappropriate way to manage people within a culture that may reflect a humanistic locus of human value. This is currently suggested by May et al.’s (1998) work on Russia. This view is currently illustrated by the growing management literature in at least two parts of the world, South Africa and India. In practice this is embodied in the ubuntu movement in South Africa (e.g. Mbigi, 1997), where enlightened corporations are attempting to integrate indigenous African approaches with their people management systems, and in India (e.g. Rao, 1996) where an Indian approach to Human Resource Development provides a synthesis

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of Western and Indian approaches (Chapter 10). It may also be that the so-called K-type management of Korea (Chen, 1995) represents an effective synthesis of indigenous Korean with Japanese and American approaches. In developing effective international and cross-cultural systems, managers should learn to think outside the parochial box of HRM. Developing lateral flexibility across cultures may be one approach to this, and this is discussed in the context of Europe in Chapter 7; integrating some of the concepts of the learning and knowledge organization discussed in Chapter 6 may also offer a way forward, as we see in the concluding chapter. Blindly introducing Western HRM practices that reflect an instrumental view of people may be ineffective, if not an affront to the humanity of people outside Western tradition. Yet managing globally goes further than simply adapting effectively practices from one culture to another. Managers should ask themselves what could be learned from the humanism of South Asia and from Africa in managing global enterprises successfully. What can be learned from the attempts to reconcile instrumental and humanistic approaches in the countries where this is becoming more successful?

Towards a conceptual approach to managing people internationally

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From the above, it is possible to draw three interdependent conceptual threads that need to be considered in managing people internationally: stakeholder consideration; locus of human value; and multicultural/strategizing oppositions. An understanding and a consideration of stakeholders are important in any enterprise. The ferry disaster described in the opening pages of this Introduction is an example of the disregard of the stakeholder perspective. Within the context of corporate life two categories of stakeholder may be identified: corporate and community. In many societies these two sets of stakeholders may be quite distinct. For example, a high regard for shareholder value in societies stressing a free market economy may regard the local community within which it operates as only a source of labour. Where there is a high governmental or institutional involvement in the finances and control of enterprises, government and local communities may be high profile stakeholders in the enterprise. One of the major tasks of the management of people within the enterprise is to reconcile the distinctions between these two groups, and between the lives of people in the community, and their lives in the enterprise. Across cultures, there are different ways in which this is approached. One major cultural influence is the way in which people are perceived in organizations (locus of human value). An instrumental cultural perspective may therefore give rise to a contractual relationship with the employee who provides his or her time in exchange for wages. A humanistic cultural perspective may give rise to an obligatory relationship of commitment among members of the corporation. As a result of the often competing centrifugal and centripetal forces in international management, which on the one hand lead to local cultural adaptation and adoption, and on the other to universalization of management principles through international strategizing, there are different combinations of solutions to this issue: some highly adaptive and successful, and some not so successful. Hence hybrid solutions adopted in Korea may be regarded as successfully

INTRODUCTION: BEYOND HUMAN RESOURCE MANAGEMENT

reconciling corporate and community life, whereas solutions in many sub-Saharan African countries have been maladaptive. These themes are taken up in the following chapters, which offer examples of different approaches to managing the international integration–differentiation dilemma, and which reconcile corporate and community life in different ways by considering cultural variations in the way people are perceived in organizations. These themes, and the linkages between aspects of HRM/people management are encapsulated in the conceptual map at the end of the Preface. They are illustrated by cultural interactions mediated by corporations such as IKEA, Crédit Lyonnais, Andersen Consulting, Royal Dutch/Shell, Chiba International, BP, DEC and Volkwagen–Skoda. Chapters 1 and 2 focus on differentiation and integration respectively. The reconciling of these two influences is a dynamic that is taken up in subsequent chapters. Chapter 3 involves a concern with converting strategic objectives to operational objectives, and realizing these through a competences approach for selecting and developing key people. Often this has a universalizing effect, and is based on instrumental perceptions of people in organizations. Yet it is possible to see the influence of differentiation by distinguishing different types of management competences required in different countries’ contexts. The competences approach can also be challenged from a cross-cultural perspective, and evidence is provided that it is not a universal approach to HRM. These aspects have to be taken into consideration when looking at expatriation (Chapter 4) where often the competences approach is used to select and develop expatriates. Expatriates (often known as ‘missionaries’) transfer know-how, appropriately or inappropriately. Again this involves the interplay of the influences of differentiation and integration in a process that includes the management of individual careers as well as a corporation’s planning of its deployment of human resources: making sure it has the requisite skills and knowledge in the right place at the right time. Not least, expatriate–local interaction, and the transfer of people management principles and practices, have major implications for the motivation of the workforce. The way this is undertaken from a Japanese perspective is looked at in Chapter 5, with an examination of the cultural transferability of principles and techniques. This is an altogether more holistic approach to motivation, taking account of employee/ corporate commitment, but may be context dependent. The concept of the learning organization (Chapter 6), although emanating itself from a particular culture, might be useful in understanding and managing the transfer of knowledge across cultural contexts, and integrating indigenous knowledge with imported know-how. An important aspect of this is the appropriate motivation of an indigenous workforce. These aspects are taken up in later chapters that look at international joint ventures (Chapters 8 and 9). Organizational learning is particularly important where there is a need for organizations and work practices to be flexible across geography and across time (Chapter 7). Hence, in times of rapid technological, social and economic change there is a need for temporal flexibility. Working across borders and cultures there is a need for lateral flexibility and to adapt work practices and organizational forms appropriately. Again the interplay of the need to differentiate across cultures and to integrate through international strategizing comes to the fore. This is especially the case in international joint ventures.

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There appears to be a high failure rate among such joint ventures in China (Chapter 8 illustrates one such failure). This may well be a question of the poor management of differentiation–integration, the lack of organizational learning, and the lack of developing appropriately flexible organizational forms and work practices. The way knowledge (including the cultural perception of people in organizations) is transferred in joint ventures is relevant to a consideration of people management in post-Soviet countries (Chapter 9). So much of this involves the transfer of knowledge through joint ventures. The wholesale adoption of Western HRM systems in Russia, for example, has been problematic. As discussed above, this may be a result of taking up a ‘hard’ instrumental approach. One suggestion for the successful transfer of know-how across cultures is that corporations take a stakeholder approach (Mills, 1997). This is no less relevant in post-colonial countries (Chapter 10) than in post-Soviet societies. By taking such an approach, some of the antitheses discussed above, may be reconciled. The sometimes contradictory influences of local differentiation and global integration may be reconciled by taking account of the perception, expectations and needs of all stakeholders. It may be possible to manage the often opposing perceptions of people as a resource for the organization, by seeing that people have a value in their own right. The two worlds of work and community may be reconciled through managing these oppositions by developing appropriate hybrid organizational forms and processes. This is a particularly appropriate aim in postSoviet and post-colonial countries, where so often people feel alienated from the world of work. It is hoped that this text can shed some light on these issues.

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The problem of transferring management techniques from one culture to the other is often viewed as a problem of the lack of transferability of American techniques to the rest of the world (Hofstede, 1980b). Differences in power distance, different levels of achievement-based incentives, and differences in work-related attitudes such as centrality of work and values associated with Hofstede’s concept of masculinity–femininity seem to explain some of the problems encountered by Americans in their management of people in some northern European countries. When a Swedish company extends operations into cultures that are generally more hierarchical, more rule bound, and more status conscious than Swedish culture, what problems are encountered? There is a need not only to be crossculturally aware. A facility for cross-cultural management of people and organizations is suggested. The objective of this chapter is to focus on the management of differentiation across cultures in an international operation and to consider the issue of transferability of people management styles and techniques across cultures. In order to do this it is necessary to consider the current cross-cultural management literature. To place this in the context of real cultures and real management issues, the company IKEA is considered as a corporate mediator between Swedish people management culture, and other cultures (American, French and German), and especially Spanish culture and the issues arising and solutions adopted.

Swedish culture and people management According to Hofstede (1980a) Swedish organizational and management culture is low in power distance, which means that organizations tend not to be hierarchical. It is high in individualism, very high (the highest in Hofstede’s study) on femininity and low in uncertainty avoidance. Economic and political democracy, within the Swedish social democratic political model, stresses six fundamental values: equality, freedom, democracy, solidarity, security and efficiency (Furness and Tilton, 1979). Even though economic contingencies have required a decrease in state planning and welfare, and a move towards more economic competition, this particular model of social democracy is still very prominent. It relies on close collaboration between business, government and labour. Gannon and Associates (1994) have remarked that this has created a society which is free from the inequalities of capitalism and the inefficiencies of the authoritarian central planning of communism, and is indicative of the Swedish word lagom, meaning a combination of ‘middle road’ and ‘reasonable’. They suggest that Swedes are

chapter one

The cross-cultural organization: the multicultural model

INTERNATIONAL HRM

unemotionally practical, believing that problems can be solved rationally through the application of reason. This results in a uniquely sensible way of life which is calm, well ordered, part welfare, part technological advance, part economic innovation and part common sense. Gannon and Associates (1994) outline three main facets of Swedish culture: • Love of nature. Sweden was late to develop as an industrial nation but this industrialization was rapid from the beginning of the 1900s with only 2 per cent of the population employed on the land, the tie with farming and unspoiled nature being implicit. This industrialization with an emphasis on engineering has given international prominence to such companies as Volvo, Saab, Scania, Ericsson, ASEA, SKF and Electrolux. The low power distance may reflect the traditions of village life, and a low uncertainty avoidance may reflect an outlook which is not threatened by the ambiguity of living with nature. A strong practicality and rationality may also reflect the closeness which is felt to the farming community. This practicality, Gannon and Associates suggest, may also be shown in the strong commitment to a welfare state, yet without nationalizing industry. • Individualism through self-development. Individualism is connected to a person’s own self-development and time to him/herself, rather than the competitive thrust of corporate life (as perhaps is the case for American individualism). It can lead to insularity, but can also encourage self-dependency. Work centrality is not high, and managers complain about an unwillingness of employees to do overtime (a factor involved in Hofstede’s femininity). Five weeks’ holiday is the norm, and absenteeism and excessive sick leave is an issue, with an average of 27 sick days per year, which is more than five times the US average. Quality of life is important, and the achievement orientation of Swedes is often directed towards jobs which can help them develop as individuals, that are intrinsically interesting or allow them to spend time away from work. Decentralized decision making may be part of this quality which encourages interest in the job and independence. Yet often corporate life involves making decisions through groups, working towards group goals, and conforming to the group. • Equality. This is quite often expressed through complex systems of welfare and other state mechanisms designed to provide the same service to everybody: health service, child benefits, maternity/paternity leave, pensions, and so on. Taxation is high in order to support these systems, and also serves as a leveller of social inequalities. Commitment is high to overseas aid, and to the government’s integration policies towards immigrants, many of whom have sought humanitarian and political refuge in Sweden. There are indications that these systems have come under both economic and political pressure in recent years. In corporate life this quest for equality has been reflected in lower hierarchies and participation in decision making.

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Parkum and Agersnap (1994) suggest that such equality is reflected in society and corporate life by: equality between men and women (75 per cent of women are in the workforce, the largest female participation rate of any OECD country: Hammarström and Nilsson, 1998); slight class differences, with

THE CROSS-CULTURAL ORGANIZATION

education, job status and income making a difference; and narrow income differentials. Education is important as is competence in one’s occupation. Lawrence and Spybey (1986) further indicate that egalitarianism in the workplace precludes authoritarian management and a ‘them and us’ attitude; facilitates communication both vertically and laterally; and is a prerequisite for the operation of industrial democracy and co-determination. Most employees are members of unions (90 per cent blue-collar and 80 per cent white-collar employees: Hammarström and Nilsson, 1998) largely because a number of social benefits, including unemployment benefit, are administered by the trade unions, and the degree of union influence achieved through the long period of Social Democratic government and the close government–union relations. The Act of Codetermination at Work (Medbestämmandelagen) was passed in 1976, and this prescribed that management should be a joint effort of capital and labour, between managers and union representatives, both having equal rights to information, and managers having to consult the unions before any major decision on changes in the company, including restructuring and introduction of new technology. Local unions also have the right to representation on companies’ boards of directors (Hammarström and Nilsson, 1998). In recent times, since the end of the 1980s, there has been a move towards blurring distinctions between blue- and white-collar workers in ‘associate’ agreements, which cut across trade unions’ representation in the workplace and treat all employees as associates. There has also been a growth in the service industries, and in economic problems which have weakened union influence. Joining the European Union in 1994 may also be leading to a more European model of fragmentation of bargaining structures and consequent weakening of the unions. From the outside, the structure and processes of Swedish organization may be seen as ambiguous by foreign managers: with matrix structures, overlapping of reporting systems, decision-making processes which seem long and diffuse, and a lack of visibility of these processes, with unclear objectives and a possible perception that management is indecisive and has difficulties in establishing when a decision has actually been made. Relations with foreign subsidiaries are often informal, with control being implicit yet still compelling, as well as a tendency to seek consensus and avoid conflict. Feedback may be clear, but corrective action against poor performers is exceptional with authority not usually exercised on the basis of formal power (Parkum and Agersnap, 1994).

IKEA: managing cultural differences Since its inception in the 1950s and its subsequent internationalization, IKEA has had to deal with the problem of maintaining its unique ‘Swedishness’ as a competitive advantage, but at the same time having to adapt this to the different national cultures in which it has been working. IKEA (Grol et al., 1998) has over the last 25 years become a global player: this is unusual in the furniture distribution industry, which often remains national in character. It has established itself all over Europe including the South and East, and in North America. Its biggest single markets are Germany, Sweden and France. It also has a presence in the Middle East, Singapore and Hong Kong, and is looking to enter the mainland Chinese market. It has recently taken over

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Habitat, its main rival in the UK and France. Its founder, Ingvar Kamprad’s business philosophy has been to supply low-priced (30 to 50 per cent lower than traditional distributors), reasonable quality furniture with no delays in supply. This has attracted strong reactions from the company’s competitors over the course of IKEA’s development. IKEA’s logistics, sourcing and retailing strategies have reflected this. Producers are consided as major stakeholders and together with IKEA work to reduce costs through long production runs and other means. Flat-pack self-assembly of simple Swedish design is what IKEA offers its customers. This is combined with a distinctive store design which aims to attract customers and hold them. This has created a strong Swedish character, which is used throughout IKEA’s markets to sell the company and its products: furniture which is durable, easy to live with, and which represents a natural and youthful free lifestyle (its recent advertising campaign in England extols its potential customers to stop being so English). Products are designed by Swedish designers in its Swedish and international headquarters in Almhult. This Swedish character is also strongly represented in its internal organization. Hence management style is seen as informal, open and caring. Hierarchy is relatively flat, with three levels of responsibility at store level between store manager and ‘co-workers’ (employees or ‘associates’). Decision making by consensus is embedded in management practice and co-workers are encouraged to take initiatives. Making mistakes is seen as an aspect of learning by doing, and pragmatic problem solving is encouraged. Managers are expected to share information with employees, as well as their knowledge and skills. Hence employees are considered important and encouraged to feel responsible for improving working practices. Bureaucratic procedures and status barriers are disparaged, and managers are expected to be close to co-workers, and not to take themselves too seriously. This apparently egalitarian approach (titles are not given on managers’ business cards, and economy model cars are the same for all who need them) has encouraged employees to work their way up the organization with little formal training. This organizational culture is propagated by discussion and explanation rather than through training programmes and detailed rules and regulations. The founder’s ‘Testament of a Furniture Dealer’ which sets out his philosophy is distributed throughout the organization. Managers are encouraged to act as ‘missionaries’ to communicate this culture by example and explanation, as can be seen by the strong presence of expatriate managers in international operations. Managers who have not been directly exposed to the founder’s way of doing business are provided with a one-week seminar at Almhult. Typically, a new store is opened in a foreign market by a tight-knit group of well trusted ‘missionaries’ who solve problems and make decisions. They run the store until it is turned over to local managers, while keeping most of the key national positions in the hands of Swedes until the market and operation has reached maturity. Human resource management practices have reflected this strong Swedish approach, with a belief that people like to participate in decision making, like to be respected and take on responsibility. People are recruited on the basis of their good communication skills, open minds, positive work attitudes and good potential without necessarily having formal qualifications. They are expected to favour cooperative informal relations, be independent with a high toleration of others, know how to listen and be able to communicate their knowledge to others,

THE CROSS-CULTURAL ORGANIZATION

while not feeling they are any better than anyone else. IKEA appears to offer a pleasant working environment, job security and a caring attitude to its employees. Swedish managers are expected to be ambassadors, and explain the IKEA way to non-Swedish co-workers in overseas operations. This has proved relatively easy in the Netherlands, but not so in Germany and France. In the United States older workers seem more at ease with Swedish managers than American managers. Younger American managers show a lack of egalitarian spirit towards employees. There is generally a lack of Swedish managers within IKEA willing to work long periods out of the country, and the company has had to hire Swedish managers from outside IKEA. Although there is progression within store management for non-Swedes, they have found it difficult to work their way up the promotion ladder in production and the international organization. This is centred on the headquarters at Almhult, a remote location where only Swedish is spoken. There is no formal career path, and apart from a good understanding of the product range and the IKEA way, working through the informal network is essential, yet hard for outsiders. The culture itself is difficult: humbleness is not seen as a weakness, and learning from experience, which takes time and patience, is viewed as a prerequisite for moving up the ladder, which is seen in itself as something which cannot be rushed. Grol et al.’s (1998) research on problems encountered by IKEA’s management of people in Germany, France and the USA, although producing some national stereotypes, indicates that in Germany there were problems of addressing managers using first name and undermining managers’ authority; doing exactly as the manager asks and not using one’s own initiative. IKEA concepts were regarded as too vague, while managers’ suggestions were interpreted as orders; there were also problems with regarding Swedes as more results oriented but without properly assessing risks before taking action; and with the lack of formal rules and the need to reduce bureaucracy. In France there were problems of informality being seen as a sign of weakness or indecisiveness, meaning that employees could do what they liked; a problem with keeping subordinates informed; with the lack of a formal job description and written procedures as well as general flexibility; with status not being recognized, causing identity problems and being lost in the crowd; and trade union distrust of IKEA’s consensus management approach. In the United States people felt uncomfortable with the Swedish lack of showing emotion; avoiding conflict and not setting themselves apart by avoiding self-promotion. There were also problems with instructions by managers not being spelt out, and the longer-term Swedish management approach of explaining why things are done: this is seen as indecision. There was a perception that individual achievement is not rewarded in view of a Swedish avoidance of discrimination in pay increases. As a consequence they lost key American managers because of slow progression and not being sure of their role or future in the organization. How can these problems and issues be understood in a sensitive way by employing concepts from the cross-cultural management literature? What are the implications for people management practices in multicultural organizations?

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The multicultural model In this chapter, and in the book generally, a multicultural model is used. This suggests that the interesting aspect of working internationally is that we have to work with people who have different cultural heritages. Cultural differences should be taken into account when communicating and interacting across nations and across cultures within nations. Although multinational companies are supranational in operations and strategy (this is the subject of Chapter 2), people within them do not necessarily share the same cultural values and views on people and life. The multicultural model is built on the premise that it is necessary to understand cultural differences, rather than trying to smooth them over or override them. For example, companies like IBM may have a strong corporate culture, but one of the aspects that the work of Hofstede (1980a) demonstrated was that within IBM there is wide cultural variation across nations.

Cultural values

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Hofstede’s (1980a) empirically derived theory on cultural values and how they relate to organizational life instituted a conceptual framework and methodology some two decades ago which has provided a standard for subsequent studies. Although this has attracted some criticism over the years, and has been at least partially superseded, it has gone a long way in guarding against the approach of pure ‘description’ of a national culture. Such descriptions abound in a myriad of publications on how to do business in specific countries (one of the more intelligent of these being Harris and Moran, 1989). This type of approach often leads to stereotyping, and to expectations about a different culture which might hamper cross-cultural communication. Stereotyping is a common way of perceiving different nationalities, and it is necessary to be aware of the implications of this and the difficulties which may be encountered as a result of relying too heavily on such caricatures. The approach taken in this text is not to add to these ‘potted’ descriptions of different nationalities, but to try to transcend such a ‘commonsense’ approach by building frameworks which provide a means of analysing and thinking about the differences and similarities among different cultures. This can be described as ‘thin’ description. ‘Thick’ description should also be used to understand a specific culture (often in relation to one’s own), but should not be based on ‘travellers’ tales’ or other anecdotal information. Throughout this book, thick descriptions are constructed of specific illustrative cultures, such as Sweden and Spain in this chapter. These are built on conceptual frameworks of cultural differences drawing attention initially to values (e.g. Hofstede, 1980a; Schwartz, 1994; and Smith, 1996), for example the ‘cultural metaphor’ approach of Gannon and Associates (1994), and on specific work in the literature on management and human resource practices in the specific country. Hofstede (1980a) was one of the first to attempt to develop a universal framework for understanding cultural differences in managers’ and employees’ values based on a worldwide survey, although not the only one (see e.g. Haire et al., 1966; England, 1975). The argument here is that this work was a starting point, both for serious academic research, and for managers working across cultures to

THE CROSS-CULTURAL ORGANIZATION

make a first estimate of the differences in organizational values which may exist among different countries. Hofstede’s work (which is already well documented; for a synopsis see Hofstede, 1994) focuses on ‘value systems’ of national cultures which are represented by four dimensions (five in Hofstede, 1991): • Power distance. This is the extent to which inequalities among people are seen as normal. This dimension stretches from equal relations being seen as normal to wide inequalities being viewed as normal. Hofstede’s (1980a) sample of Swedish managers and organizational employees scored very low (31) on this scale (maximum 104, minimum 11). Spanish managers and employees scored higher (57). Of the other countries referred to in this chapter, (former West) Germany scored a relatively low 35, USA a relatively low to medium 40 and France a relatively high 68. • Uncertainty avoidance. This refers to a preference for structured situations versus unstructured situations. This dimension runs from being comfortable with flexibility and ambiguity to a need for extreme rigidity and situations with a high degree of certainty. Sweden scored a very low 29 on this scale (maximum 112, minimum 8), with Spain a high 86. The former West Germany scored a medium 65, France a high 86 on a level with Spain, and Hofstede’s (1980a) sample of US managers and organizational employees scored a relatively low 46. • Individualism. This looks at whether individuals are used to acting as individuals or as part of cohesive groups, which may be based on the family (more the case with Chinese societies) or the corporation (as may be the case in Japan: Hui, 1990). This dimension ranges from collectivism to individualism. Spain is relatively weak on individualism, scoring a medium 51 (maximum 91, minimum 6), while Sweden is relatively high, scoring 71. USA is the highest (91). France has the same score as Sweden (71), and managers and organizational employees from Hofstede’s (1980a) sample of the former West Germany scored at around the same level (67). • Masculinity. Hofstede (1980a) distinguishes ‘hard values’ such as assertiveness and competition, and the ‘soft’ or ‘feminine’ values of personal relations, quality of life and caring about others, where in a masculine society gender role differentiation is emphasized. Sweden is the lowest on this dimension, scoring 5 (maximum 95, minimum 5) indicating a very high level of femininity. Spain has a medium to low score of 42, and France 43. The US samples scored a medium to high 62, with the former West Germany at 66. Hofstede (1980a) factor-analysed his questionnaire data to derive his four cultural values dimensions. From this Hofstede (1980a, 1991), drawing on prior literature, extrapolated from his data and, drawing on other studies since his own, he derived detailed descriptions of these dimensions. Power distance is polarized into small and large and comprises attitudes which people within the culture have about the acceptable inequalities between people in the society or organization. In small power distance cultures there is a belief that inequalities among people should be minimized, that parents should treat children as equals and that

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teachers expect student initiative in the classroom. Hierarchies in work organizations are established as a convenience intended only to manage inequality of roles. Decentralization is popular, subordinates expect to be consulted, and privileges are frowned upon in a small power distance society. Conversely, in a large power distance culture, inequalities are expected and desired, parents teach children obedience and teachers are expected to take the initiative in the classroom. Hierarchies in organizations reflect the natural order of inequalities between the higher-ups and the lower-downs, centralization is popular and subordinates expect to be told what to do. Privilege and status symbols are also expected. Weak uncertainty avoidance cultures accept uncertainty as a feature of everyday life, there is generally low stress and people feel comfortable in ambiguous situations. People are curious about what is different. Students are happy with open-ended learning situations, and teachers can say ‘I don’t know’. Rules should be kept to a minimum, people may be lazy and may work hard only when necessary. Punctuality has to be learned, and people are motivated by achievement and esteem or by belonging to a group. Strong uncertainty avoidance is characterized by the threat of uncertainty which is always present but must be fought. It is characterized by high stress and a fear of ambiguous situations and unfamiliar risk. There is a feeling that what is different must be dangerous. Students are more comfortable in a structured learning situation and like to be told the right answer: teachers are supposed to know the answers. There is an emotional need for rules, even when these may not work. There is a need to be busy, and a feeling that time is money: an inner urge to work hard. Punctuality is natural, and people are motivated by security, esteem or belongingness. A study which supplements this, building on concepts both of uncertainty avoidance and of power distance, is that of Laurent (1986). In an international study one item provided a statement ‘It is important for a manager to have at hand precise answers to most of the questions that his subordinate may raise about their work’. Only 13 per cent of managers from the United States and Sweden agreed with this, 18 per cent from the Netherlands, 27 per cent from Denmark, 30 per cent from Britain, 40 per cent from the former West Germany and from Switzerland, 49 per cent from Belgium, 59 per cent from France and from Italy, 67 per cent from Indonesia and 77 per cent from Japan. In individualist societies people look after themselves and the immediate nuclear family. A person’s identity is based on him or her as an individual. Speaking one’s mind is respected. Education is aimed at learning to learn, and academic and professional diplomas increase self-respect and potential economic worth. The employer–employee contract is assumed to be based on mutual advantage, and hiring decisions are supposed to be based on individual competence. Managers manage individuals, and tasks are more important than relationships. In collectivistic societies people are born into and protected by extended families, to which they give loyalty. One’s identity is based on belongingness to a social group or network. Children are taught to think of ‘we’ not ‘I’. Rather than speaking one’s mind, harmony should be maintained and direct confrontation avoided. The purpose of education is to learn how to do this, and diplomas provide entry into higher status groups. Rather than purely a contract, the employer– employee relationship is seen as a moral one such as a family relation-

THE CROSS-CULTURAL ORGANIZATION

ship, and when hiring or firing, the employee’s in-group is considered. Managers manage groups, and relationships are more important than tasks. In a ‘masculine’ society values are based on material success, money and possessions. Men are expected to be assertive and ambitious, and women tender and concerned with relationships. The father deals with facts and the mother with feelings. There is sympathy for the strong and the best student is the norm: failing in school is seen as a disaster. People live in order to work. Managers are expected to be decisive and assertive, and there is a stress on competition, performance and resolution of conflict by direct means. In contrast, the ‘feminine’ society has values of caring for others and preservation rather than progress. People and good relationships are more important than money and things, and people are expected to be modest. Both men and women are expected to be concerned with relationships, and both mother and father should deal with feelings and facts. There is sympathy for the weak, and the average student is the norm. Failing in school is a minor accident. People work in order to live. Managers use intuition and try to gain consensus. There is a stress on equality, solidarity and quality of work life. Conflicts are resolved by compromise and negotiation. A study which relates to the dimensions is the Meaning of Working study (MOW, 1987) which investigated the related value of work centrality. This study supported the assumption that national cultures vary in the extent to which organizational employees see work as central to their lives. Japanese employees were discovered to have a higher work centrality than those in the USA, who had a higher work centrality than those in the former West Germany.

Other cultural dimensions Although Hofstede’s (1980a, 1991) work has been influential in the formation of a sub-area of management theory – cross-cultural management – some criticism has been directed at his work over the years, mostly methodological but also conceptual in nature. For example, some commentators have suggested that because collectivism is target specific, an appropriate emphasis of study is not on the degree to which individuals are concerned with each other, but on the way this involvement is distributed in society (Hui, 1988; Hui and Triandis, 1986). Hofstede’s (1980a) original factor analysis generated a first factor which was a combination of individualism and power distance. His subsequent conceptual separation of these two dimensions (which correlate at –0.67) was justified by their low correlation when variation due to national wealth was controlled for (Berry et al., 1992). Uncertainty avoidance, although based only on three questionnaire items, does have a reasonably well-developed conceptual background based in a concept of tight–loose cultures (Peltro, 1968; Triandis, 1990). The masculinity– femininity construct is not extensively supported in the literature (but see Eagly, 1978, who discusses gender differences in social behaviour). The power distance dimension is constructed from only three questionnaire items, and appears to be related to collectivism. Again, this is generally not well supported in the subsequent literature. Hofstede’s (1980a, 1991) definitions of the four dimensions are far broader than perhaps justified by the limited number of items which comprise at least two of the dimensions (Berry et al., 1992). Some criticism has also been directed at the

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fact that the study was undertaken entirely within IBM (although Hofstede, 1991, himself argues that this enabled differences due to organizational culture to be controlled for, while enabling the study to focus on national cultural differences). Other studies have failed to corroborate Hofstede’s dimensions (IDE, 1981; Williams and Best, 1982). A fifth dimension was added by Hofstede (1991) to the original four. This was developed through the Chinese Cultural Connection study (CCC, 1987), and in part justified by Hofstede’s (1991) warning of the dangers of developing constructs from a Western point of view. The Chinese Cultural Connection was an attempt to counter this by introducing an Eastern perspective and values. The study reinforced three out of the four dimensions in Hofstede’s (1980a) study: the Chinese dimension of ‘human-heartedness’, which incorporates values such as kindness, courtesy and social consciousness, correlates negatively with masculinity; ‘integration’ which encompasses the cultivation of trust, tolerance and friendship correlates negatively with power distance; ‘moral discipline’, including values of group responsiveness, moderation, adaptability and prudent behaviour, correlates negatively with individualism (CCC, 1987). None of the new dimensions correlated with uncertainty avoidance, but a new dimension was added, termed Confucian dynamism (Hofstede and Bond, 1988) and then long term orientation (Hofstede, 1991), with values of persistence and perseverance, ordering relationships by status and observing order, thrift and having a sense of shame (Hofstede and Bond, 1988). Uncertainty avoidance is concerned with absolute truth, which may not be a relevant value in Chinese society and other Eastern cultures which are more concerned with virtue. Of particular relevance is the virtue of working hard and acquiring skills, thrift, patience and perseverance: all values connected with this fifth dimension which may replace uncertainty avoidance as a relevant Eastern concept (Hofstede, 1991). On a scale from a minimum score of 0 to a maximum 118, Pakistan scores 0 and China 118. The Chinese societies of Hong Kong (96) and Taiwan (87) are towards the top of the scale with Japan (80) and South Korea (75) next. India scores 61, Singapore 48 and the Netherlands 44. Sweden (33), Poland (32) and the former West Germany (31) follow. The USA scores a relatively low 29, with Britain at 25. Of African countries, Zimbabwe (25) scores the same as Britain, and Nigeria is second from bottom with 16. This seems to bear out an assumption that the Eastern ‘tiger’ countries which have done well economically are high on this dimension, with the Anglo-Saxon countries relatively low, and African countries with a short-term economic perspective scoring very low. Other studies have been undertaken which in part have taken a lead from Hofstede’s seminal work. It is important to understand this work in relation to the management of people in international organizations. Despite severe limitations of methodology and academic rigour, the work of Trompenaars (1993) has been used extensively, particularly in connection with cross-cultural management development activities. It is necessary to consider its conceptual relevance to understanding the management of people in international organizations, while bearing in mind its limitations, and focusing on the reanalysis of Trompenaars’ extensive database (Smith et al., 1996). Trompenaars’ (1993) work was conceptually built on Parsons and Shils (1951) and Kluckholn and Strodtbeck’s (1961) formulations of cultural differences, and other dimensions drawn from Rotter (1966) and Hall (1959). These are: regard

THE CROSS-CULTURAL ORGANIZATION

for rules or relations (universalism–particularism), individualism–collectivism, neutral–affective expression of emotions, low and high context societies (specific– diffuse) and the way status is accorded (achievement–ascription). Trompenaars (1993) also considers attitudes to time (synchronic–sequential) and relation to nature (external–internal locus of control). His results are presented in terms of the percentage of positive (or negative) responses to each of several questions for each of some 50 different nationalities. His information was gathered through administering a questionnaire to attendees of management seminars in the various countries surveyed. Smith, Dugan and Trompenaars (1996) reanalysis provides two major value dimensions (through multidimensional scaling). Positions of countries on two axes representing scores on the two dimensions are provided in Figure 1.1.

Loyal involvement

Sin

2

1

HK Jap Spa Ind

0

Chi

–1

Rus

Figure 1.1 Location of selected countries on Smith et al.’s (1996) cultural values dimensions

Fra Ire UK Aus US NLGer SweNor Den

Pol Cze

–2

Utilitarian involvement –3 –4

–3

Conservatism

–2

–1

0

1

2

3

Egalitarian commitment

Note: Approximate locations of illustrative countries referred to in the current text, with those referred to in this chapter emboldened: Aus (Australia), Chi (China), Cze (former Czechoslovakia), Den (Denmark), Fra (France), Ger (former West Germany), HK (Hong Kong), Ind (India), Ire (Ireland), Jap (Japan), NL (Netherlands), Nor (Norway), Pol (Poland), Rus (former Soviet Union), Sin (Singapore), Spa (Spain), Swe (Sweden), UK (United Kingdom), US (United States). See Smith et al. (1996) for details on other countries. Numbers on axes represent relative positions on MDS plot and are used in this adapted figure as guides only.

A summation of these dimensions comprising value elements which are composites of each dimension, and those which correlate with each dimension, is provided in Table 1.1. The concepts which Trompenaars’ (1993) items are purported to capture, and which are referred to in Table 1.1, are as follows: • Universalism–particularism. In some cultures people see rules and regulations as applying universally to everyone, regardless of who they are. In cultures which are more particularist, people see relationships as more important than applying rules that are the same for everyone. There is an inclination to apply

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the rules according to friendship and kinship relations. This has implications for recruitment and promotion policies in organizations in some Asian countries, which may be at variance with practices in countries such as the United States and Britain. However, there are differences in European countries. Greece, Spain and France are seen as more particularist, and Sweden, former West Germany and Britain as more universalist. One of Trompenaars’ questionnaire items asks respondents to assume they are a passenger in a car which a friend is driving in an urban area above the speed limit. He hits a pedestrian. His lawyer says that it will help him considerably if you swear in court that he was driving below the legal speed limit. Helping your friend indicates particularism, not helping him indicates universalism. • Achievement–ascription. Status is accorded to people on the basis of what they achieve in their jobs and their lives (achievement) or who they are and where they come from such as family background, their school or some other prior factor (ascription). Quite often more traditional societies accord status according to the latter precept. Again, this may influence recruitment and promotion policies which may be at variance with practices in some (but not all) Western cultures. On some measures Austria, Belgium, Spain and Italy are more ascription oriented, and Denmark, Britain and Sweden more achievement oriented. • Locus of control. People tend to believe that what happens to them in life is their own doing (internal locus of control), or they have no or little control over what happens to them (external locus of control), the causes of which are external to them. Table 1.1

Comprises:

Correlates with:

Composition and correlates of Smith et al.’s (1996) cultural dimensions Conservatism

Egalitarian commitment

Utilitarian involvement

Loyal involvement

Ascribed status favoured

Achieved status favoured

Aspects of individualism which stress individual credit and responsibility

Aspects of collectivism which stress loyalty and obligation to group, and corporate loyalty and obligation

Particularistic Paternalistic employers Formalized hierarchy

Universalistic Non-paternalistic

Hofstede’s collectivism Hofstede’s high power distance Schwartz’s conservatism falls just short of significant correlation External locus of control

Hofstede’s individualism Hofstede’s low power distance Schwartz’s egalitarian commitment Internal locus of control

Hofstede’s individualism Hofstede’s low power distance

Hofstede’s collectivism Hofstede’s high power distance

Functional hierarchy

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Paternalism is also an important concept in cross-cultural research and management, and is more thoroughly investigated elsewhere (see Aycan et al., 1999: 504), who define it as ‘people in authority assuming the role of parent and considering it an obligation to provide support and protection to others under their care’, and Redding, 1994). Also referred to in Table 1.1 is Schwartz’s (1994) global study of cultural values. Dimensions were derived from his data by smallest space analysis, and are shown with scores of those countries discussed in this chapter in Table 1.2 (with the exception of Sweden, which was not included in this study; Denmark is the only Scandinavian country included). The scores shown in Table 1.2 are for samples derived from schoolteachers. Schwartz (1994) argues that these are good representatives as they are custodians of culture and it is they who pass this on to the next generation. He also takes a sample from university students, which corroborates results from schoolteachers. It is likely that because of the way the constructs and the variables comprising them have been tested among various cultural groups, at both individual level and group level, that they may be claimed to be universally representative of values which may occur anywhere in the world. They also provide a more upto-date cross-cultural study of values than the Hofstede study, as well as accessing former Soviet countries and China. Omissions, particularly from the point of view of the current text, include Sweden, UK, India. The inclusion of Zimbabwe is of interest, as little information of this sort exists on the sub-Saharan African countries.

Some reflections on the cross-cultural organization In management, a clear analysis and understanding of an issue should lead to implementation. If it is possible to understand the implications of culture for the management of people, what do we then do with that information in a practical situation? For example, if we know that a high power distance culture prevails in a particular country, do we make sure that our people management practices reflect accepted and expected high levels of inequality? Do we adopt authoritarian behaviour because this is what employees expect? Or, do we bring to the situation ideas of participative management and employee empowerment? Sometimes the answer is not simple. Let us take the example of organizations in emerging regions where, as in the case of Africa, management practices have been regarded as fairly authoritarian and power distance regarded as high (Blunt and Jones, 1992). Perhaps employees expect and accept this level of power inequality at work, yet workers are alienated from their places of work. Traditional African cultures reflect a high level of participation and lower levels of absolute authority (Reader, 1997) and this is shown in the levels of mutual cooperation found in the informal economic sector in African countries (Brown, 1995). Entrepreneurs like Koopman (1991) have obtained good business results from developing more participative methods in South Africa, and the movement towards more democratic employment relations is also growing in that country (Jackson, 1999). Mostly, IKEA has had to operate outside Sweden, in countries that may be seen as having a higher power distance. So, how did IKEA adapt to the need to keep its essentially Swedish management philosophy, while making its people

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INTERNATIONAL HRM Table 1.2 Schwartz’s (1994) cultural values with scores of selected countries Conservatism Conservatism Values which support the status quo and likely to be important in societies based on close-knit harmonious relations. Interests of the person are same as the group. Stresses security, conformity and tradition. Correlates positively with Hofstede’s power distance and negatively with individualism + Singapore 4.38 Taiwan 4.31 Poland 4.31 Zimbabwe 4.21 Hong Kong 4.04 China 3.97 United States 3.90 Japan 3.87 Netherlands 3.68 Denmark 3.64 East Germany 3.50 West Germany 3.42 Spain 3.42 France 3.35

Self-enhancement Hierarchy Stresses power relations and authority, and the legitimacy of using power to attain individual or group goals (not the legitimacy of inequalities). Correlates negatively with Hofstede’s individualism

China Zimbabwe Japan Taiwan Hong Kong Singapore East Germany Poland United States West Germany Netherlands France Spain Denmark

+ 3.70 3.14 2.86 2.85 2.83 2.75 2.69 2.53 2.39 2.27 2.26 2.16 2.03 1.86

Automony Intellectual autonomy The individual pursues own interests and desires in the intellectual area (intellectual self-direction). Correlates positively with Hofstede’s individualism and negatively with power distance + France 5.15 Spain 4.90 West Germany 4.75 Japan 4.68 Denmark 4.58 East Germany 4.47 Netherlands 4.44 China 4.27 United States 4.20 Poland 4.09 Hong Kong 4.08 Taiwan 3.93 Zimbabwe 3.82 Singapore 3.68 –

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Mastery Mastery of the social environment through self-assertion, and to get ahead of people. Positively correlates with Hofstede’s masculinity

China Zimbabwe United States Japan Hong Kong East Germany Spain Taiwan West Germany Poland Netherlands Denmark Singapore France

+ 4.73 4.62 4.34 4.27 4.18 4.16 4.11 4.11 4.07 4.00 3.98 3.97 3.93 3.89

Self-Transcendence Affective autonomy The individual pursues own interests in the affective domain (stimulation and hedonism). Correlates positively with Hofstede’s individualism and negatively with power distance + France 4.41 East Germany 4.16 West Germany 4.03 Denmark 4.01 Spain 3.97 Zimbabwe 3.85 United States 3.65 Japan 3.54 Netherlands 3.51 China 3.32 Taiwan 3.21 Poland 3.13 Hong Kong 3.11 Singapore 3.04 –

Egalitarian commitment Transcending selfish interests, voluntary commitment to promoting the welfare of other people, rather than through obligation and kinship ties. Correlates positively with Hofstede’s individualism + Spain 5.55 Denmark 5.52 France 5.45 Netherlands 5.39 West Germany 5.37 East Germany 5.29 United States 5.03 Hong Kong 4.85 Poland 4.82 Singapore 4.79 Japan 4.69 Taiwan 4.68 China 4.49 Zimbabwe 4.48 –

THE CROSS-CULTURAL ORGANIZATION

Harmony Stresses harmony with nature as opposed to assertion and dominance over the environment. Correlates positively with Hofstede’s uncertainty avoidance + Spain 4.53 West Germany 4.42 France 4.31 Taiwan 4.17 Denmark 4.16 Poland 4.10 East Germany 4.08 Japan 4.07 Netherlands 3.98 Singapore 3.72 China 3.71 United States 3.70 Zimbabwe 3.42 Hong Kong 3.34

management practices more compatible with employees’ expectations in the other countries of operation? Firstly in France, the company has provided clear communication in facts and figures of IKEA’s benefits compared with its competitors. Formal training programmes have been developed as a more credible alternative to learning by doing. Management has also taken a more affirmative attitude towards employees, headed by a Frenchman (who has a Swedish wife) who has worked at the IKEA headquarters at Almhult, and has developed better relations with trade unions. While Grol et al. (1998) note no significant changes in Germany in IKEA’s people management policies, in the United States changes have been made. Not only has the company adapted its marketing and business practices, IKEA has given more autonomy to local management. An American style performance review procedure has been initiated, requiring the documenting of performance strengths and weaknesses (something with which the senior Swedish managers feel uncomfortable because of its formality, and the negative feedback it gives, and in practice this has resulted in little pay discrimination). The question remains: can IKEA maintain its particular Swedish approach to managing people in view of its expanding international and multicultural operation? And how can it develop a truly cross-cultural approach to managing and developing people? These questions can be answered, at least in part, by now focusing on IKEA’s operations in Spain.

Spanish culture and work values Spain is depicted by Hofstede’s (1980a) data as being of medium power distance, but far higher than Sweden and on a par with Taiwan and Pakistan; less individualistic than Sweden and close to India and Japan on this dimension.

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Masculinity is not high, but somewhat higher than in Sweden and on a par with Peru, France and Iran; and with Peru, France, Chile, Costa Rica, Panama and Argentina it is very high on uncertainty avoidance, with Sweden being very low. Gannon and Associates (1994) remark that it is this high uncertainty avoidance that is reflected in the tendency to work in the same organization for many years and sometimes for life. This may also be part of the clustering together in both rural and urban habitations, a need generally for close proximity as an act of selfdefence, and the love of communal festivals (rather than as an indication of collectivism). Loyalty, however, does not extend to the larger collective, but to the smaller units of family, friends, town and region, with a protective instinct towards these and especially towards children. Although the nurturing role of women at the centre of the household and the authority of the man was enshrined in a number of laws under Franco, things have changed considerably since his death in 1975, yet still few women attain high level jobs. Gannon and Associates’ (1994) assertion that Spanish culture is one of proud individualism also mirrors Schwartz’s (1994) findings that Spain is high on intellectual and affective autonomy and low on conservatism, as well as being high on egalitarian commitment. It is based on a fierce self-sufficiency, but is anarchic and inorganic, with no cohesive and unified goal (Crow, 1985), which can lead to a difficulty in cooperating. Work centrality is also low, although ‘moonlighting’ (taking on a second job) is common in order to make financial ends meet: perhaps as a result of jobs not being well paid. There is a social orientation rather than a task orientation, with an emphasis on the quality of life. Selfexpression may be more important than material success (Gannon and Associates, 1994), and emotional expressiveness may reflect the Spanish score on Schwartz’s (1994) affective autonomy, and an ability to act genuinely and hospitably towards colleagues and associates. With a long break in the middle of the day which extends the working day well into the evening, socializing with family and friends often goes on late into the night. Yet Hofstede’s (1980a) score for Spain for power distance reflects a subordination to authority and an acceptance of inequality, with work organizations being hierarchical. Work relationships between managers and employees can be paternalistic and are often formal (Diaz and Miller, 1994). This perhaps reflects a gulf between rich and poor in the wider society.

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28

Spain has changed, and is changing fast. A high rate of foreign direct investment including the presence of large operations run by such American multinationals as General Motors and Hewlett Packard, and Japanese giants such as Nissan, Sanyo and Sony has had an effect on human resource practices as well as production techniques. This is accompanied by a growing internationalization of Spanish companies (Diaz and Miller, 1994). While the majority of businesses are small and medium sized, and under-unionized, the larger privately owned and prominent state enterprises (which have increasingly come under privatization plans) are heavily unionized with a power sharing balance. Although only 10 per cent of the working population is unionized and the unions have relatively weak organizational structures, they do have power in negotiations through collective bargaining and sometimes mobilization of workers. As a result of negotiation, job

THE CROSS-CULTURAL ORGANIZATION

security is good, and severance can be expensive for employers. This has all contributed to a need to balance economic activity with social interest. The government is directly involved in the redistribution of industrial wealth, and in correcting regional economic imbalances. Spain is a strong supporter of the European Social Chapter (Diaz and Miller, 1994), and workers’ committees are a legal feature in all enterprises larger than 50 employees. Apart from these committees, there is still little worker participation in the decision making of the company and a lack of two-way communication between directors and workers. Despite improvements in worker productivity, as a result of declining employment opportunities and better vocational training, productivity levels are still lower than than those achieved by countries such as Japan and the United States. Although things are changing towards more formal job descriptions and specified criteria and methods for selection, this is often still absent in small and medium-sized firms (Diaz and Miller, 1994). Training has grown in importance, particularly since the 1980s, although it can still be lacking in perceived importance in some areas. In areas such as staff planning and development training, Spain has lagged behind other EU countries and investment in such areas is amongst the lowest in Europe. The concept of career progress and remuneration in relation to employee performance was not part of corporate culture, but this has changed drastically in recent years. This has accompanied a belief that investment in training people within the company rather than bringing them in from the outside is more effective. Again there have been major changes in pay systems from quite rigid salary structures to very flexible ones.

IKEA in Spain1 Communicating the organization culture IKEA entered Spain almost as a complete unknown. It has since been involved in communicating and instilling its Swedish character and the IKEA culture into the Spanish subsidiary. It has sought to do this in a number of ways: • A network of Swedish managers was sent as a build-up team with the main objectives to pass on their know-how and the IKEA culture to the local management. This is one of the items evaluated in the latter’s annual performance appraisal, and is regarded as extremely important. This is because at the lower levels of the organization the ‘IKEA world’ is limited to the local stores. It is through the day to day interaction between managers and ‘coworkers’ at store level that the culture develops. • Employment of the ‘right’ people is regarded as one of the key means of preserving the IKEA culture. These are young co-workers who can keep up the enthusiasm; people who have not been ‘contaminated’ by another company culture and whose values correspond to the IKEA ones. IKEA does select on the basis of competences, which were defined by taking as the starting point the ‘glossary of terms’ used in the IKEA ‘Little Dictionary’. These competences are then used as the basis for evaluation of co-workers during their ‘Development Talks’.

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• Awareness is created through introductory programmes for new co-workers; through ‘IKEA Way’ seminars during which participants are given lectures on IKEA’s history, human resource ideas, and so on; and by official ‘scriptures’, handbooks and other IKEA documents.

Adapting the organizational culture Although co-worker awareness is high, many are rather sceptical towards the culture. The Swedish style of management with its avoidance of formal planning and unwritten manuals, informality in recruitment, the search for unconventional solutions, cost consciousness, team spirit, and informal and egalitarian relationships, differs from what would be regarded as the ‘normal style’ in Spain. For most of the co-workers hierarchy is something natural, they need to have clear responsibilities and to know who is in charge of what. It is also important for them to move up the promotion ladder. The management realized that because the co-workers question the idealized description of the company, they had to address this by becoming more ‘structured’ and taking a more conscious approach to developing the organization and to generally adapting to local needs. The first way this was done was to recruit a Spanish human resource manager. Other steps that were taken are as follows: • Running ‘Cultural Seminars’ to help everyone to discuss their experience and opinions about the culture and how it is put into practice. By using the managing director and the human resource manager as facilitators, a message about its importance is sent out. It is also stressed that participation is vital in order to improve the organization. Participants go through the ‘IKEA words’ in the ‘Little Dictionary’ and create a debate by using the ‘four room apartment model’ and working in groups on the IKEA words. They agree on which stage of the model IKEA Spain is at the moment (satisfaction, inspiration, denial or confusion). This then leads to conclusions about the ‘hot issues’ or areas in which problems are being perceived. Participants are also asked to formulate realistic and feasible proposals of changes, and are encouraged to follow up on these. • Development programmes have come into focus to ensure the retention of talent within the company, offering possibilities for making a career in IKEA. Co-workers with potential to become group leaders go through the Aspirant Programme (year 1). Group leaders with potential to become departmental heads are invited to participate in the Selling in the IKEA Store Training Programme. To meet the needs of further expansion in Spain, the Leadership Development Programme has also been designed. • In association with these development programmes there is succession planning from group leader level upwards. The stated intention is that by 2001 80 per cent of the management should be Spanish.

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• Annual training plans are formulated which include a number of off-the-job training courses. These are strongly demanded by co-workers and regarded as an important benefit. Such off-job training programmes also comply with the

THE CROSS-CULTURAL ORGANIZATION

National Agreement with Trade Unions which requires companies to provide employees with general skills they can use outside their company in order for them to have a value on the job market. • A flexible salary structure is being developed in order to attract and retain competent employees. IKEA salaries are mostly fixed, and this does not conform to what Spanish workers have become used to. There is a movement towards a compensation package which reflects the performance level of coworkers, as opposed to current IKEA rules.

Implications for managers The use of wide-scale studies on cultural values is useful as a good first guess of the nature of management and organization in different countries. They should be regarded as a starting point for managers working across cultures. For example, this may have helped the management of IKEA in making decisions about adapting its culture to the expectations of its Spanish employees. Such studies of course have limitations, and should be supplemented with detailed knowledge about management systems in the respective countries. A summary follows of the main cultural dimensions in common use (both academically and in management development circles in English speaking countries), and their implications for managing people across cultures. • Power distance (Hofstede, 1980a): the extent to which participative or paternalist management is appropriate. Many theories of people management are based on Western perceptions drawn from what works in a medium to low power distance culture. Participative management does not have universal currency throughout the world. More paternalistic or even autocratic methods of managing people may be more appropriate (or expected) where there is a higher power distance. • Individualism/collectivism (Hofstede, 1980a): the extent to which group or individual results are appropriate; the extent to which Management by Objectives-type systems are appropriate. Western methods of human resource management (HRM) focus on individual incentives and on the performance and results of individuals. The encouragement of such individualism may not be appropriate in more collectivist countries. • Masculinity and work centrality (Hofstede, 1980a; MOW, 1987): the extent to which results-focused approaches are appropriate; the centrality of work to employees. Work is not seen as equally central to people’s lives in every culture. Results-focused HRM systems do not always work successfully in other cultures. • Uncertainty avoidance (Hofstede, 1980a): the degree of control, rules and regulations needed over employees. There is a move away from control and regulation in Western HRM. Particularly in the management of change, people are encouraged to take ownership of the change through communication and decision-making groups. This may increase uncertainty, so may not be appropriate in cultures that seek to decrease uncertainty. It may be more

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appropriate to decrease the risk and uncertainty by introducing rules of operation to affect change. • Universalism (Trompenaars, 1993): the use of ‘nepotism’ and its appropriateness and logic. Why employ someone you do not know when you can employ someone you do know? You can put pressure on the employee’s family if they do not perform as expected. You can also trust them in a way that you cannot trust a stranger. Nepotism is often seen from a Western perspective as negative, but this may need reconstruing in the context of a particularistic culture. • Ascription (Trompenaars, 1993): the extent to which recruiting and promotion policies are based on prior factors (education, family) or achievement factors. Not all cultures place equal emphasis on achievement. Prior consideration of education and family standing may be more important in the recruitment of people. Ideas and policies on recruitment, pay and promotion may need modifying when managers move from an achievement to an ascription society. • Locus of control (Trompenaars, 1993): the extent to which fatalism is a factor in what people can achieve and do; the extent to which individuals feel they have control over their working lives; the extent to which planning is seen as effective. If you reward people on the basis of results, and those results are felt to be beyond the control of the individual, then the HRM system may be out of line with the culture. This may also influence other aspects like the feasibility and success of training and development. • Long-term orientation (Hofstede, 1991): the extent to which employees may be given short-term targets in the case of short-term orientation (e.g. quarterly sales targets), or where long-term perspectives are seen as more appropriate. Western (particularly American) targets may be quite short term (monthly, quarterly, annually). Management in longer-term-oriented cultures may require a greater commitment to developing relationships, and steadily developing market shares. • Egalitarian commitment (Schwartz, 1994; Smith et al., 1996): the extent to which employee welfare is seen as a right and obligation, or as a voluntary commitment. The levels of ‘collegiality’ or allegiance to co-workers varies from culture to culture. This should be taken into consideration when focusing on the nature of the work process, as well as relative commitment (and nature of that commitment) to the organization and co-workers.

Questions for managers 1 How could the cultural dimensions listed above have helped the Swedish IKEA management to better prepare itself for managing people in Spain? What are the major differences and similarities between the two cultures on these dimensions, and what are their implications for management? What are their shortcomings, and what additional information would have been useful for the IKEA management?

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2 What advice would you give to the management of IKEA if it were planning to set up operations in your country?

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3 How could IKEA have better adapted itself to the expectations of its local management and workforce in the United States?

An agenda for research It may be concluded from the case of IKEA that research by companies on culture as it affects work values and management techniques is neglected, and that consumer research and product development is regarded as more pressing when entering a new country. Within the academic literature, there is a lack of research on the connections between culture, work values and people management practices which may ultimately inform such practices in organizations such as IKEA, as well as in the many American (and other Western) multinational companies which operate across national borders but seem to be blind to cultural differences (Boyacigiller and Adler, 1991): a blindness which must have implications for their effectiveness. One approach that points the way for future research is the model of cultural fit which is proposed by Kanungo and associates (Kanungo and Jaeger, 1990; Mendonca and Kanungo, 1994; Aycan et al., 1999). This postulates that the sociocultural environment affects internal work culture and ultimately human resource management practices (being mediated by internal work culture). It is this connection which is particularly pertinent to the approach taken in this chapter: the discussion in the above section ‘Implications for Managers’ may be regarded as setting out a number of hypotheses regarding the connection between cultural values in the literature and the effective management of people in different cultures. The model of cultural fit, for example, proposes a connection between ‘socio-cultural’ dimentions, ‘internal work culture’ and ‘human resource management practices’. ‘Socio-cultural dimensions’ include paternalism, power distance, masculinity, uncertainty avoidance, loyalty to community and self-reliance. ‘Internal work culture’ includes task-driven assumptions (such as profit versus social gain, process versus results and pragmatic versus normative competitive orientation), employee-related assumptions (futuristic orientation, locus of control, malleability, proactivity, obligation towards others, responsibility seeking and participation). ‘Human resource management practices’ are concerned with job design (feedback, autonomy, skills variety, task significance), concerned with supervisory practices (goal setting, empowerment and control) and concerned with reward allocation (performance-reward and contingency). In a study that sought to test this model in Canada and India (Aycan et al., 1999) the assumptions of the model were supported by the findings. In particular, paternalism and loyalty to community were predictive of variation in work culture and HRM practices. The study found that paternalism, power distance and uncertainty avoidance seemed to create a dependent relationship between subordinate and boss, leading to an assumption of lower employee proactivity, and consequently not encouraging employee autonomy on the job. It also found that HRM practices involving joint goal setting seemed to be a result of managers’ perceptions about employee reactivity and obligation towards others, which in turn seemed to be influenced by the socio-cultural values of paternalism, loyalty to the community and self-reliance. Also, HRM practices involving feedback, empowerment and performance–reward contingencies seem to be a function of

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managers’ assumption that employees can change and control the outcomes of their actions. These beliefs in malleability and internal locus of control seem to be adversely influenced by the socio-cultural values of community loyalty and paternalism. Finally, from this study, masculinity seems negatively to influence futuristic orientation, which in turn inhibits goal-setting practices. This, the authors suggested might indicate a connection between masculinity and shortterm materialistic gains, and femininity and longer-term investment in developing enduring relations. This study points the way to further research, which could encompass other countries. However, even though research may produce information about the connection between cultural values and people management practices, this still does not answer the question about how managers who wish to introduce more participative techniques may do so (if this is socially desirable and ethically sound). This may require additional research on the effectiveness of attempts to do so, and may necessitate case study research. This chapter has pointed to the relationship between diverse culture in a multicultural organizational situation, and the implications for the management of people in international organizations. The implications are that cultural values should be taken into account when managing people across cultures, yet the connections proposed in this chapter are still under-researched. The work of Kanungo and associates suggests an avenue for future research that may inform managerial practice. The case of IKEA illustrates the issues and problems of one international organization with a strong corporate culture derived from its Swedish origin, and its attempts to both communicate this culture and to adapt this to the local cultures of its international operations. Succeeding chapters look more specifically at culture-specific aspects of people management. First, Chapter 2 places this within the context of international organizations operating supranationally. It explores the strategic aspects of this, and the relationship to effective management of people in international organizations.

Questions for researchers 1 What is the relationship between cultural values and people management practices? What are the shortcomings of this approach in understanding people management practices in different countries? What additional information is needed? 2 What are the main causes of cultural clashes between managers from Sweden and employees in Spain? What can be done to lessen the negative aspects and to strengthen the synergies between the two country cultures, as manifested in people management practices? What would happen if Spanish managers operated in Sweden with Swedish employees? 3 What measures can a management team take to successfully set up operations in another country, where the local culture is different from their own?

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THE CROSS-CULTURAL ORGANIZATION

Note 1. I am grateful to Pilar Guitian Gonzalez and Richard Hynes of IKEA Spain for this information.

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There are two ways to look at an international organization. The first is to see it as a set of relationships between national units, each of which exists within its national culture. Apart from its people having different cultural values, as was discussed in Chapter 1, the organization will also work within the local conditions of the host country. This includes legal, social, economic and political circumstances. In this view, the headquarters organization in the home country will have to adapt its human resource management practices to the circumstances in the host country. This will lead to a differentiation of practices among the subsidiary countries, and between the headquarters and the subsidiaries (affiliates). The other view is that the international organization will have a set of objectives which can be achieved only by integrating the various geographical functions. Hence an overall strategy will have to be formulated in order to achieve objectives. Following from this, an overall, international human resource management strategy will be formulated and a policy will be implemented throughout the international organization. If the last chapter was about differentiation by culture, this chapter is about integration across cultures or nations. However, no company which operates across borders is simply ‘international’ in the sense of having no national identity, but purely an international presence which cuts across national cultures. All corporations are rooted in the national culture and identity from which they grew, although some have made great strides towards the ‘transnational’ model discussed by Bartlett and Ghoshal (1989) which is discussed later. Crédit Lyonnais is a company firmly rooted in its French origins and identity. By its nature banking is an international business, yet national banks often find it difficult to become truly international in concept and in scope, and particularly in organizational culture. The quest of IKEA to maintain its unique Swedishness as a competitive advantage is not so much an issue when it comes to banking. Finance is the same, given local differences in legislation, all over the world. Market makers and bond dealers do the same things in London as they do in Frankfurt or in Hong Kong or in New York. New products are copied rapidly, and adapted to different national markets. The banking industry has undergone massive changes in the last decade, with liberalization of the marketplace, intense competition from institutions not previously direct competitors, and a more discerning customer who can shop around for the best deals. Through market liberalization has come more intense competition on the home front from foreign institutions. Innovation in technology over the last decade has ensured that financial markets effectively

chapter two

The strategic organization: the supranational model

INTERNATIONAL HRM

ignore national borders. The internationalization of Crédit Lyonnais may be firmly placed within the context of these developments of banking whilst being firmly rooted within its French cultural context (Chevalier and Segalla, 1996). The objective of this chapter is therefore to explore the issue of integration of international organization across borders by looking at the way different strategies influence the management of people throughout the international operation. In order to do this, the literature on international strategy and human resource management is examined. To position this within a real culture and focusing on real issues, Crédit Lyonnais is provided as an example of a French bank struggling with internationalization. French management culture is discussed in order better to understand the types of approaches the bank has taken.

French culture and people management Trouvé (1994) outlines the factors influencing culture in France. Firstly, France is a Catholic country, which, according to Weber, explains the distrust of the business world, and the attachment to the rural community, particularly in the south. A sense of honour in being able to serve the state and one’s fellow men, since the time of Louis XIV, may have been at the expense of industrial development. D’Iribarne (1989) has observed that within traditional French organizations an ‘honour system’ still operates which is different from the ‘contract system’ of the United States, or the ‘consensus system’ which may be more typical of the Netherlands or Scandinavian countries. The state is important in France (Trouvé, 1994): it plays a positive and active role in both economy and society. From Louis XIV, through the Jacobins of the Revolution and the code civil of Napoleon, the tradition of centralization has been maintained in recent times. Since the Second World War the state has played a major role in financing the revitalization of the economy, with ownership of energy, the main deposit banks and insurance companies and the car industry. These traditionally high levels of centralization and involvement of the state are perhaps reflected in France’s high levels of power distance and uncertainty avoidance (Hofstede, 1980a). This may also be seen in the education system, often said to be elitist, inegalitarian, discriminatory and exclusive (Trouvé, 1994), and the associated means of identifying and developing high potential in traditional French organizations, with the management cadre traditionally being recruited from the exclusive grandes écoles. This type of background has been more important than the results individuals are able to achieve in the job. Self-made managers are still not common in traditional French organizations. These organizations generally have many hierarchical levels, with each level restricting managers to a narrow range of activities and responsibilities. Autonomy within these well-defined areas is guarded against encroachment (d’Iribarne, 1997). Roussillon and Bournois (1997) outline the main features of French management which pertain in the literature:

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• excessive importance of the elitist education systems which guarantee top posts for young graduates, with an established hierarchy of diplomas which contribute heavily to preconceived career patterns;

THE STRATEGIC ORGANIZATION

• highly responsible posts given straight away to young graduates from prestigious schools, despite lack of practical experience; • an emphasis on the theoretical, with young executives in ‘consultancy’ positions with conceptualizing responsibility rather than in an operational capacity; • considerable influence of public sector practices in career management on the private sector, particularly on those firms which work closely with the public sector or have been recently privatized. Hence Crédit Agricole has set up competitive examinations like those in the public sector, to select top executives; • moving those from careers in government administration directly to top jobs in private enterprise. This practice of ‘pantouflage’ allows top managers to move back to their former positions in public administration if they desire; • exclusivity of ‘old boy networks’ in French business life. Workers’ attitudes to their organizations has been largely instrumental: they consider work as a necessity and have a low involvement in the well-being of the company. Human resource management has mainly focused on the connection between the objectives of employee and organization during the 1980s and 1990s (Chevalier and Segalla, 1996). However, this, and the sometimes negative portrayal of French management in descriptions such as that of Roussillon and Bournois (1997), needs further comment and analysis. Barsoux and Lawrence (1990), after Michel Crozier, see the impersonality of French work relations as reflecting a need to separate personal and professional relations, to maintain a distance from the role and the person occupying the role, in order to protect one’s independence. Authority is vested in the role not the person, and this is how a French manager gets things done. The pattern of interpersonal relations at work is therefore formal. Work is done in isolation, punctuated by formal meetings, excluding the need for personal involvement. Barsoux and Lawrence (1990) suggest that French cadres are specialists in ‘meetings’, where much of organizational life comes together in a microcosm (Barsoux and Lawrence,1990). The impersonality and formal nature of relations characterizes the hierarchy, but segregation and partitioning in organizations is also horizontal. This may all be part of the protection of one’s territory and independence from one’s role. Hence French work relations may be more highly structured and detached than the Anglo-Saxon model which may disparage the French system. Yet the lesser involvement of the self may be seen as a means of preserving personal choice, independence and individual dignity (Barsoux and Lawrence, 1990). Attempts to introduce more informality into organizations have often been unpopular and seen as a means of subordinating the interests of the individual to the interests of the company. Preserving one’s independence through detachment of the persona from the role is important to preserving human dignity. It could be suggested that this avoids some of the problems of the extreme instrumentalism in the Western model of human resource management, by detaching the self from the means of achieving the organization’s ends. This may be an alternative solution to the influence of the human relations school in the Anglo-Saxon world which attempts to soften the effect of instrumentalism on individuals, and may

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reflect the Weberian stance. Catholic countries have historically had a mistrust of commerce and industry, whilst the Protestant ethic has engendered an identification with work in enterprises. The state has also been used in France to protect against the extremes of a free market economy, through major investment in industry, and has sought to ensure that companies invest in people through training. There is an obligation on companies to devote 1.4 per cent of their salary budget to training, and they are required to draw up a training scheme in consultation with works councils (Trouvé, 1994; Tregaskis and Dany, 1996). The state is involved in collective bargaining through legislation which, for example, requires all companies to prepare a ‘social plan’ before implementing layoffs. Works committees were established as early as 1945, and employee participation is a feature enshrined in legislation (Goetschy and Jobert, 1998). People are protected by the state in other ways, such as by the high levels of public medical care and state pensions, which are paid for by higher social charges on employers and employees.

Crédit Lyonnais: The Internationalization Process The requirement for French banks to assist in the development of industry was established by Napoleon II, who set up two national banks to this end (Garrison, 1994). The main French banks either are or have been in state hands. Apart from state ownership, the government also plays a key role in employment relations, and itself is a major employer with its salary budget representing some quarter of GNP. Employment relations have tended to be confrontational. Although French trade unions have much political and economic power they actually represent directly less than 10 per cent of the workforce. Through collective agreements, conditions negotiated generally apply to all employees in a particular industry. This situation applies in the banking industry. This has perhaps been important as banks have struggled to refocus both their business and their ‘human capital’ over this period. Both banks and their employees have had to focus more on being competitive, client focused and more international. Chevalier and Segalla (1996) specify these challenges as: • needing to grow through acquisition, in order to dominate niche markets such as personal, investment or small business banking; • becoming a universal bank offering a full range of financial services in all major markets; • defending domestic markets by developing client relations; • selling more services such as insurance and financial advice.

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This has had implications for the management of ‘human capital’ in changing a surplus of ‘old style’ generalist banking personnel to new style personnel who can address the needs outlined above. This has meant some retrenchment, retraining and recruiting of new employees who fit these needs. Crédit Lyonnais was privatized in 1999, with the government retaining a 10 per cent share. With assets of $214 billion it is a profitable business and has new

THE STRATEGIC ORGANIZATION

management and a market value of $9.6 billion. This followed a state bailout which segregated most of the bank’s previous bad debts into a separate entity, and follows a major fraud scandal which caused Forbes magazine to dub Crédit Lyonnais the ‘dirtiest bank in the world’ (Forbes, 13 December 1999). Yet in September 2000 the bank (France’s third largest) reported it had overcome its previous difficulties by doubling its half-yearly profits and its return on equity (Financial Times, 8 September 2000). Founded in 1863, Crédit Lyonnais became a major universal and global bank, headed by a chairman appointed by the government after nomination by the board of directors and fulfilling the role of chief executive officer. Separate operating divisions of the bank comprise those responsible for the domestic banking network, international affairs, capital markets, relations with major corporates, and real estate. Administrative processing, group financial management, marketing and human resources each have their own divisions. Other specialized divisions include legal services, inspectorate and research. The Europe network had been expanded during the decade to 1991, and the bank had 630 offices in Europe and 610 offices outside Europe, including foreign branches, subsidiaries with major shareholdings and associated companies with minority shareholdings. The bank had two growth strategies: organic growth (increasing the activities of its branches and subsidiaries or opening new units); and acquisition or merger (take-overs or purchasing minority interests in local banks). It had also expanded its capital market activity in the major financial centres of the world (coordinated through its Capital Markets Division). There was a perceived need (according to Chevalier and Segalla’s 1996 research) for better integration of this expanding international network in terms of common products and management of clients who themselves are operating internationally. This was from a position of dominance of French management in its traditional form and foreign operations that had been centralized around an international division of the bank based in France. Human resource management had been characterized by pragmatic career management, different systems of career management for French and foreign managers, and by using expatriation as the main link between the headquarters and foreign operations. Its main characteristics and influences appear to have been as follows: • Its tradition as a deposit bank with reliance on general rather than specific skills, and promotion based on seniority. With increasing attention to commercial activities this had been somewhat reversed, with specialist and commercial expertise being brought in and promoted. • Historically being based on a worldwide organization with local managers being delegated large amounts of power, and respect for this personal power of fiefdom being ingrained in the organization. This local autonomy had been protected, and this resulted in internal competition where local managers are reluctant to share customers with colleagues in other countries militating against the need to service clients who operate across borders. This had been addressed partly by increasing professional mobility and changes in the organization chart, but coordination remained a problem. • A corporate identity which instilled pride in working for a world leader and which extended to foreign employees, and a caution which acted both positively

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when taking on innovation and technical improvements, but also negatively in a distrust of the new and the foreign. • A career management system that was strongly oriented towards the bank’s French managers. At local level across the international network human resource practice was seen as a local responsibility with different rules and procedures. At the group level there are two systems of career management: one for French and a less well developed one for non-French. Promotion was based largely on where vacancies exist, and favoured managers in touch with the right personal network and associated with prestigious projects. This militated against strategic career and human resource planning. Local career development was managed locally and was generally restricted to opportunities within the particular country. • French expatriates provided the link between the Paris headquarters and the foreign subsidiaries. Whilst this may have maintained and transmitted the corporate culture and ways of doing things, it also isolated subsidiaries from the centre. • Crédit Lyonnais could be seen as essentially a French bank with an international dimension. Cooperation and exchanges between subsidiaries were limited; information flows from headquarters to subsidiaries were vertical, with subsidiaries feeling they were not involved in strategic development. Career opportunities within the group were limited for foreign executives. Crédit Lyonnais is an example of a French bank struggling with its internationalization process. Before looking at different strategies which involve the use of people internationally through formulated human resource strategies, policies, plans and practices, it is worth looking at a model of globalization which takes up the main theme of this chapter: the integration of multinational organizations through cutting across national (as well as cultural) boundaries.

The supranational model In 1977 Alvin W. Wolfe, an anthropologist, identified the main features of a supranational system encompassing multinational corporations and states . . . a modern supranational structure that is more than just international . . . a cultural-ecological system that is above the level of the nation-state and above the level of the multinational firm . . . the system of our concern is different from an international organization and different from a cartel formed by corporations . . . a qualitatively disinctive sociocultural system at a higher level of integration. . . . Involving states, corporations and networks of corporations and states and persons, systematically processing information in such a way that the higher-order system exerts significant control over the elements organized at a lower level of integration. (Wolfe, 1977: 631)

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He was suggesting that the international production system through multinational enterprises was in effect working beyond and above the level of the nation state.

THE STRATEGIC ORGANIZATION

Once a legal fiction recognized by a state government for a strictly limited purpose, the corporation has developed to the point that some of its variants are operating multinationally, with virtually unlimited purposes of their own and identities quite unrelated to their origins and to the identities of their shareholders, and controlling in some sense more resources than most states. (Wolfe, 1977: 619) The extraction industry is an example of how this has developed, for example across African states, often with government involvement: ‘The new states are weak, their governments poor, so they tend to take their places among the companies in the system rather than try to upset it. An advantage of the circuitous, acephalous character of the supranational system is that no coup d’état on that plateau is possible’ (Wolfe, 1977: 619). Early multinational organizations such as the British and Dutch East India Companies were able to maintain their own armies, and to govern countries in which they did business. Latter-day multinationals, perhaps more subtly, work across nations through the movement of capital and finance, often with the involvement of nation states and major corporations within different countries. The United Nations Centre for Transnational Corporations estimates that there are some 37,000 transnational companies in the world with 170,000 affiliates (subsidiaries), with the top 100 companies owning about a third of the worldwide foreign direct investment stock (UNCTC, 1993). In many senses, they transcend nation states, and can often have an influence on events, particularly in ‘developing’ countries, which far exceeds any intervention that other nations’ governments might make. At least a third of all world trade takes place inside such companies (UNCTC, 1993). One of the implications for the multicultural model discussed in Chapter 1 is that here is an approach which tries to diminish the effects of national cultures on the operation of the organization, although the degree to which this may happen is largely dependent on the nature of the internationalizing strategy of the organization. Using the supranational concept as an analogy, the purpose of this chapter is to explore the ways organizations have internationalized (often ignoring national and cultural differences), and the implications for the management and development of people within the international context. In so doing, two frameworks are introduced for classifying organizations: Perlmutter’s 1969 geocentric model and Bartlett and Ghoshal’s (1989) transnational model. These frameworks are used to cut across most of the confusion in describing cross-border organizations and its relation to human resource policy in the international context.

Strategies for international organizations A great deal has been written on the need to develop new and more adaptive forms of organizations as a result of increased internationalization. Particularly the changes in Europe, and the needs of cross-border operations have prompted discussion on these issues (see also Chapter 7). Van Dijck (1990) has pointed to the tendency towards transnationalization as evidenced in Europe by an increase in cross-border operations, investment and strategies in Europe. This has also

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included an increased international mobility of young graduates, professional and managers. There has also been more inter-company competition in Europe than between countries. Within multinational companies, there is a need to balance international strategy with local conditions and needs; and move towards new organizational structures. This may be away from development and direction from the headquarters, towards ‘managing diversity’ by networking structures which take account of the efforts and initiatives from all operating countries. There is an indication that old structures will not be sufficient to deal with these changes. Smiley (1989) some years ago identified a shift from ‘multidomestic’ organizations to global organizations that operate across borders to meet converging consumer tastes. This signifies a need for more flexible, temporary organizational forms that can adapt quickly to a changing marketplace. He even suggests that the word ‘structure’ will have to be conceived in its scientific form as meaning a ‘union of parts’. So rather than talking about the structure we will in future be talking about the ‘form’ of an organization.

Integration and differentiation

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One of the key aspects of the strategic management of modern organizations is the balance between differentiation and integration (Lawrence and Lorsch, 1967). While flexibility is required in the way business is conducted differently in different locations, there is a need to integrate activity and coordinate not only business activity, but the way people are developed and deployed within the international organization. Generally the more complex an operating environment the more differentiation is required. In domestic operations this may require a high level of professional specialization. Banks such as Crédit Lyonnais have been through phases of developing generalist bankers in times of relative stability, but have focused on the employment and training of specialists over the last decades in times of extreme competition, increased use of complex technology, information systems and financial products, where there is a need to have a thorough specialized knowledge of markets and products. In international situations diversity of national markets and a requirement to meet the needs of a diverse and discriminating national customer base, as well as different legislation may require a great deal of local autonomy. Combined with this may be a need to utilize specialist technical assistance from the centre, to propagate and instil a sense of corporate identity, and retain financial control over operations. These aspects require a level of integration, and the attempt to balance this level of integration with differentiation has been evident within Crédit Lyonnais (for example, the local autonomy of subsidiary managers versus the use of French expatriates in subsidiaries). Doz and Prahalad (1986) have called this ‘controlled’ variety: where there is a need to combine strategic variety and strategic control in multinational enterprises. They depict the requirement for differentiation by type of business, type of subsidiary and type of ownership. Hence the level of strategic control needed in an international operation is depicted along three axes: the type of subsidiary operating in each country; the type of international business strategy employed; and the type of ownership. Export platforms need tight controls as they are managed directly from a home

THE STRATEGIC ORGANIZATION

headquarters, while large self-contained subsidiaries, especially those prevented from being integrated fully into a global enterprise through protectionist measures, do not require heavy control. The types of international business strategy used by enterprises also influences the levels of control used. Those that see the world as a single market, and centralize research, product development and production tend to have strong international control over their subsidiaries. Some, with highly localized business and differentiated markets may organize internationally in a loose federation of enterprises and hence have very loose controls. Different types of ownership will also influence the levels of control. At the loosely controlled end of the continuum are collaborative agreements, for example multigovernment-funded technology projects such as nuclear fusion projects, and intergovernmental aerospace projects involving consortia of private sector enterprises. Through the various organizational forms being extensively employed in difficult and restrictive markets such as joint ventures, fully owned subsidiaries at the other end of the continuum are more likely to be directly controlled from the central organization in the home country. Although Crédit Lyonnais’ main activities were through fully owned or partially owned subsidiaries in the early 1990s, increasingly the banking industry sought other types of international organization such as the strategic alliance between the French Banque Nationale de Paris and German Dresdner Bank in 1993 (ul-Haq, 1995), and in 1999 Crédit Lyonnais was negotiating a three-way joint venture with a Spanish and an Italian bank to set up a pan-European investment bank. This would indicate a lessening of control for its subsidiaries and consequent altering of human resource policies to better suit the new organizational form. These types of business strategies are more fully taken up by Perlmutter.

Perlmutter’s model In the late 1960s Perlmutter (1969) suggested different internationalizing strategies that organizations tend to fit, which influence personnel practices within the global context. The ethnocentric approach is probably closest to Doz and Prahalad’s (1986) global organization, where control is tight from the centre, with subsidiaries having little autonomy, and where key positions are held by homecountry nations and there is a high degree of management by expatriates. The polycentric approach sees each subsidiary as a separate entity (purely local in Doz and Prahalad’s terms). Although subsidiaries are managed by locals, these same local managers are unlikely to have a career in the international group or at headquarters. The ‘ideal’ approach is seen as the geocentric organization (see Table 2.1). This goes beyond Doz and Prahalad’s conception in the sense that it is not merely a multifocal organization but one which is able to identify and utilize talent anywhere in the world. The regiocentric approach (added later by Perlmutter) reflects this, but on a regional basis only. It is more likely that the geocentric (and to a certain extent the regiocentric) organization will have a strong integrating culture in order to develop a certain amount of uniformity and coherence in the way people work, so that good managers can be developed for key positions anywhere. The organization then may be shaped either by the home cultures or (theoretically at least) by international interaction among the national units. This

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INTERNATIONAL HRM Table 2.1 Perlmutter’s model of international strategies Ethnocentric

Polycentric

Regiocentric

Geocentric

Prevailing organizational culture

Home country

Host country

Regional

Global

Finance

Repatriation of profits to home country

Retention of profits in host country

Redistribution within region

Redistribution globally

Strategy

Global integration

National responsiveness

Regional integration and national responsiveness

Global integration national responsiveness

Marketing

Product development determined mostly by needs of home country customers

Local product development based on local needs

Standardized within region, but not across regions

Global products, with local variation

Personnel practices

People of home country developed for key positions everywhere in the world

People of local nationality developed for key positions in their own country

Regional people developed for key positions anywhere in the region

Best people everywhere developed for key positions everywhere in the world

Source: Adapted from Chakravarthy and Perlmutter, 1985

may in fact not differ too much from the strong culture of the ethnocentric organization that is propagated by the centre. It is more likely that the polycentric organization will not have this overriding strong culture, as a result of a lack of interaction among the subsidiaries, and between the subsidiaries and the headquarters. In terms of staffing the international organization, the strategy of Crédit Lyonnais may be conceptualized as ethnocentric in the sense of propagating a strong (French) culture from the centre, and staffing some key jobs by expatriates. The fact that banks such as Crédit Lyonnais can also be regarded as polycentric in that local management has a certain amount of autonomy (control may be mainly financial, with subsidiaries being sold off if they do not perform), and local managers may have a career locally and be promoted to key, but not expatriate, careers, may indicate a weakness in such categorization of international strategies.

Bartlett and Ghoshal’s model

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In 1989 Bartlett and Ghoshal offered the ‘transnational’ as the ideal type. They distinguish: multinational organizations; global organizations; international organizations; and, transnational organizations. By reference to their model of cross-border organizing it is possible to gain insight into the environmental influences pressing hard on organizations, and how their consequent structures may influence behaviour within them.

THE STRATEGIC ORGANIZATION

Multinational This type of organization responds to the need to exploit national diversity and recognizes that, for example, consumer tastes and needs of technology may be based on local conditions and national culture. This type of organization will therefore have a strong national presence and can respond to national diversity. It will be decentralized and nationally self-sufficient, sensing and exploiting local opportunities, and developing and retaining knowledge within each national unit. There is very little direct influence from the parent company, and interpersonal communication among representatives from the different cultures may be quite limited. An example of this type of organization is the American ITT, which needs to respond on a local basis to specific regulations, requirements and formats in the telecommunications switching industry.

Global Here the organization exploits the cost advantages of centralized globalscale operations based on knowledge development that is retained at the centre, and on the implementation of the parent company’s strategies. It responds to the trends of growing globalization of tastes, fashions and consumer demand generally. This type of organization is globally scaled. An example of a global enterprise is the Japanese Matsushita (see also Chapter 5), which exploits and promotes the globalization of taste in consumer electrics, being export-based with research and development, manufacturing and branding concentrated at the centre.

International Here, the organization exploits the parent company’s knowledge and adapts it worldwide. Sources of core competences are centralized, but other competences may be decentralized. The role of overseas operations is to adapt the parent company’s competences to the local environment. Knowledge is developed at the centre and then transferred to the overseas subsidiaries. Procter and Gamble is a good example of an international organization. Many of its research and development functions are centralized, but branding and packaging of products is undertaken at local level to meet the needs of national tastes and legislation.

Transnational This type of organization is an ideal type in the eyes of Bartlett and Ghoshal (1989) and is put forward as something towards which many crossborder companies ought to be striving. It seeks to integrate the separate forces operating in the international marketplace, which each of the three organizational forms described above addresses only partially. These three forces are: • global integration: the trend towards greater integration of global tastes. Product trends such as Coca-Cola and McDonald’s are examples, as is the demand for the same consumer electric goods around the world. Global organizations address this particular market force. • local differentiation: the demand of local and national tastes, and of protectionism from national governments tend towards multinational organizational structures, and to an extent international organizational structures.

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• worldwide innovation: the cost of innovation is great and it is more cost-effective, usually, if research and development is centralized, and such products emanating from the centre are marketed globally, or are adapted internationally in local centres around the world. The corollary of this is that centralized research and development functions may not take account of the expertise and resources available in local centres, and may in fact be missing opportunities to maximize efficiencies in new product development. Transnational organizations (according to Bartlett and Ghoshal, 1989) address these issues by deploying dispersed, interdependent and specialized capabilities and assets, by facilitating differentiated contributions from national units in order to integrate worldwide operations, and by developing knowledge jointly and sharing it worldwide. In order to achieve these organizational characteristics management has a role to play in legitimizing and encouraging diverse perspectives and capabilities, developing multiple and flexible coordinating processes, and building shared vision and individual commitment. Bartlett and Ghoshal (1989: 61) describe the transnational model as an ‘integrated network’ which emphasizes the very significant flow of components, products, resources, people, and information that must be managed in the transnational. Beyond the rationalization of physical facilities, the company must integrate tasks and perspectives; rich and complex communication linkages, work interdependencies, and formal and informal systems are the true hallmark of the transnational.

Implications for human resource management policy

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Adler and Ghadar (1990) provide an account of the implications of different phases of internationalization for human resource management. Their framework and typology are similar in concept to previous ones (discussed above), yet in common with other theorists such as Negandhi (1987) they view organizational forms as representative of stages in the development of international enterprises. The four phases identified are: domestic, with a focus on home markets and export; international, with a focus on local responsiveness and the transfer of learning, and most closely resembling Perlmutter’s polycentric approach and Bartlett and Ghoshal’s multinational and international models; multinational, with a focus on global strategy and price competition, and resembling Perlmutter’s ethnocentric approach and Bartlett and Ghoshal’s global model; and global with a focus on both local responsiveness and global integration. This most resembles Perlmutter’s geocentric approach and Bartlett and Ghoshal’s transnational model. Adler and Ghadar’s (1990) model particularly looks at the relationship of culture and responses within human resource management. In the first phase, domestic, there is a denying or ignoring of other cultural contexts with foreigners simply being offered a product developed in the home country. This is reflected in the brief visits of sales, or sometimes technical, personnel to foreign offices, with technical competence the only priority. In the second phase, international, it is important to take the cultural component into consideration, as firms are moving

THE STRATEGIC ORGANIZATION

into foreign markets in which they need to operate more fully and take account of local conditions. There is a greater need for longer-term assignments, with a priority on technical and managerial skills, but also on cultural adaptation. There is also a need to recruit from the host country for lower level managerial functions in areas such as sales, marketing and personnel. The third phase, multinational, is characterized by a globalization of products and services in order to compete on price, and therefore culture is not such a major factor, but through necessity there is a recognition of cultural differences among the countries of operation. In order to utilize cost advantage around the world it is necessary to recruit from other countries, yet key positions would remain in the hands of home managers. In the fourth phase, global, there is a more complete adaptation to local markets of global products, and cultural sensitivity becomes a crucial issue. Cultural diversity is seen more as an opportunity than an inconvenience, and the international human resource function attempts to provide managers from anywhere with the opportunities to develop in order to develop the organization itself.

An integrated strategic framework Schuler, Dowling and De Cieri (1993) suggest the need for an integrated framework of strategic international human resource management that brings together a number of the aspects already discussed above. They propose that there are two major multinational enterprise components that impact on strategic international HRM issues: the inter-unit linkages and internal operations (Figure 2.1). The former involves the organization’s mechanisms for managing the differentiation and integration of its operating units; the latter involves the need for each Figure 2.1 Schuler, Dowling and De Cieri’s (1993) integrated strategic framework

Exogenous factors – industrial characteristics – country/regional characteristics

Strategic IHRM issues SIHRM functions Inter-unit linkages – control/variety

Strategic MNE components – Inter-unit linkages – Internal operations

– orientation – resources – location

SIHRM policies/ practices Internal operations – local sensitivity/ strategic fit

– – – –

staffing appraising compensation developing

MNE concerns and goals – competitiveness – efficiency – local responsiveness – flexibility – learning and transfer

Endogenous factors – structure of international operations – headquarters’ international orientations – competitive strategy – experience in managing international operations

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operating unit (e.g. subsidiary) to function effectively within its own (national or market) environment. The strategic international human resource issues in their framework are concerned with these two components and with the need to manage the international organization by balancing differentiation and integration and balancing the autonomy of local units against the need to coordinate and control them. These issues impact on strategic international functions, that is, the way human resources are managed: the resources put into its managing of functions, the location of function and the balance between centralized and decentralized functions. Some companies have large centralized human resource functions for selecting and repatriating expatriate staff, training and compensation. Others devolve many functions to the subsidiaries either as well as this central function or instead of it. These issues also impact on policies and practices, including the general guidelines on how staff are managed and the development of particular practices. Again this may involve the extent to which local practices may be developed. If general guidelines are formulated by the centre that refer only to the need to develop a system for rewarding individual performance, subsidiaries may then be free to develop their own incentive schemes. Factors both outside and inside the organization influence strategic issues of human resource management functions and policies and practices. Exogenous factors include industry characteristics such as the type of business and technologies available, the nature of the competition and the nature and extent of change; and country characteristics such as political, economic and socio-cultural conditions, and legal requirements. Endogenous factors include the structure of operations, international orientation of the headquarters, the competitive strategies being used, and the company’s experience in managing international operations. All these factors influence the company’s effort to be responsive to local factors and to be adaptable and globally coordinated and controlled. Functions and policies are aimed ultimately at meeting the concerns and goals of the multinational organization. These include global competitiveness, efficiency, local responsiveness, flexibility, and organizational learning and transfer of information. These concerns, of course, vary from company to company (Schuler et al., 1993).

Crédit Lyonnais Revisited1

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Since the mid-1990s, Crédit Lyonnais, has largely emerged from problems which severely damaged the image of the bank, both in France and internationally, with the associated difficulty that employees were unable to show pride in working for the bank. In some ways this has strengthened the corporate identity. People still with the bank now, and who were working there during that period, are now committed to the bank as they feel they supported it through a difficult time. This may be less true for newer staff, but they seem to appreciate the general calm atmosphere of the bank which reflects a spirit of cooperation and a lack of direct competition with their colleagues. Internationally, subsidiaries are still relatively autonomous, often with competition between Paris and a subsidiary. For example, Paris and London share the same region (Europe, Africa and the Middle East). Although theoretically they

THE STRATEGIC ORGANIZATION

have different clients, this often engenders competition between the two centres. However, the matrix structure of the international organization creates links between Paris and the subsidiaries. For example, in project finance (a product line) the management of each subsidiary participates in regular conference calls organized by the head of the product line in Paris. This ensures that through discussion of prospects and strategy, the subsidiaries are included, and have influence. For example the American subsidiary is particularly strong within the bank’s international operations. It is still the case that it is easier for French managers to become expatriates, compared with their non-French counterparts. It would seem that selection for such positions is based mainly on connections with the right people, as there is still an absence of career plans, and specific competency requirements. Yet more and more non-French people are working in Paris. For example, expatriates from London come as specialists to work in Paris. Increasingly in the subsidiaries key people are recruited locally. This is seen as particularly important in the Asian subsidiaries such as Hong Kong and Singapore, where local languages and contacts facilitate business with local clients. However, the top management is always French. Attitudes towards the role of expatriation are also changing. It used to be a central element in developing management (from the parent) for an employee to have experience in a broad cross-section of functions, including a period of expatriation. Specialization is now seen as far more important. However, the bank still has difficulties with this, because of entrenched attitudes. People are often keen to change their jobs after about five years, rather than stay in the same specialization, as they feel that their qualities are not recognized if they are not proposed for a change in job in the bank. This attitude is slowly changing, but there is still some way to go.

Implications for managers The extent to which the need for internal consistency (integration) across national borders contends with forces for local isomorphism (differentiation) is examined by Rosenzweig and Nohria (1994). Their study of subsidiaries of foreign companies operating in the United States suggested that in general HRM practices closely follow local practices, with differences among specific practices. It may be that their empirical study can be generalized to subsidiaries within the United States, and here their conceptual framework is more significant than their findings. The variables that they investigate, which are associated with different levels of local adaptation, are valuable for a consideration of the implication for practising managers, and these can be related to factors affecting the internationalization of Crédit Lyonnais, and indeed, to IKEA (see Chapter 1).

Local embeddedness Method of founding Greenfield investments are more likely to reflect the characteristics of the multinational company, whereas acquisitions may remain similar to local companies. Rosenzweig and Nohria’s (1994) findings support this

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assumption. Crédit Lyonnais’ main method of expansion into the early 1990s was through acquisition. With other factors, such as a management that is orientated towards autonomy of function within the different levels of the hierarchy (d’Irabarne, 1997), it is likely that this would provide subsidiaries with a higher level of local differentiation. This is quite the opposite for IKEA, whose international expansion has mainly been through greenfield investment. With other factors such as the importance attached to corporate culture (not a key consideration for Crédit Lyonnais), IKEA’s subsidiaries are not likely to be afforded a high level of differentiation.

Age of subsidiary Over the years subsidiaries should come to resemble more closely the local situation. Certainly, IKEA has had to adapt its practices to local conditions as it has become more entrenched in a country such as Spain, as was seen in Chapter 1. The opposite may be true of Crédit Lyonnais, as its acquired subsidiaries may increasingly be influenced by French expatriation, and other connections with the home country. In fact, Rosenzweig and Nohria’s (1994) findings do not support a relationship between age of subsidiary and local embeddedness.

Size of subsidiary Among other factors, larger subsidiaries will be more dependent on employees and resources within the locality and therefore more likely to resemble local company HRM practice. This was certainly a factor for IKEA, which had to recruit staff locally and had to conform more to local practices and agreements with unions. With the acquisition of subsidiaries Crédit Lyonnais is likely to have acquired use of local resources, including employees, although this may be related more to the next factor considered below. Rosenzweig and Nohria’s findings do not support this relationship among their sample of subsidiaries in the United States.

Local resource dependency The more it depends on local resources, the more likely the subsidiary is to emulate local practices. Both IKEA and Crédit Lyonnais are dependent on local resources, and this is reflected in their need to conform to local requirements, with this being more painful for the former. Rosenzweig and Nohria’s (1994) findings support this relationship.

Level of unionization The higher the level of unionization, the more likely it is that local practices will prevail. This varies from country to country, and among industries, which means that Rosenzweig and Nohria’s (1994) study is not a good predictor of the influence of this factor (their findings offer some support for this in the United States). Both banking and retail sectors tend to be highly unionized in some countries and not in others. Although the level of unionization in Spain is not high, the presence of collective bargaining agreements means that IKEA has had to conform to local training and development practices.

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Local regulatory and other pressures Conformity to local practices may be influenced by government regulations, interest and pressure groups within the local community as well as by trade associations and consumer groups (although Rosenzweig and Nohria’s findings in the United States did not confirm such a relationship). Although banking may be a similar activity through the world, it is subject to a complexity of laws in different parts of the world. This is another factor contributing to the pressure on Crédit Lyonnais’ subsidiaries to adopt local practices, with a higher autonomy enjoyed by managers in IKEA’s subsidiaries.

Parent company characteristics Parent country culture Based on the cross-cultural literature which suggests that national culture has a strong influence on company practice, it is likely that the bigger the cultural distance between the parent country and subsidiary country, the less likely it is that subsidiary practice will resemble local practice. Rosenzweig and Nohria’s findings provided some evidence for this. For IKEA its ‘Swedishness’ is seen as an important factor permeating its business and personnel practices. This is heavily protected within its subsidiary operations, and adapted to local conditions only when necessary. Crédit Lyonnais does not market its ‘Frenchness’ and is not protecting it in the same way as IKEA. However, it is likely that the French culture influences its international operations and the way its subsidiaries are managed from the centre. Hence the autonomy of subsidiaries, yet their tendency towards higher levels of centralization in financial control, career planning and expatriation, and levels of one-way communication from the centre.

International experience of the parent With greater international experience, it is more likely the parent will develop a more cosmopolitan and less parochial perspective. Therefore, the less international experience, the less likely that the subsidiary will adopt and resemble local practices. With greater experience of working internationally, IKEA has become more adept at adapting to local culture and practices while maintaining its essential ‘Swedishness’. Crédit Lyonnais has many years’ experience of operating internationally, but perhaps not of thinking internationally. This, as in many other international companies, has enabled it to successfully operate fairly autonomous subsidiary units, but not to have drawn to any great extent expertise, talent and other ways of working into its global pool of resources and knowledge. Rosenzweig and Nohria’s findings do not provide any evidence of a relationship between length of international experience of the parent and local embeddedness.

Level of control-orientation of the parent Subsidiaries with greater autonomy are more likely to adopt local practices. However, the way that control is exerted is more likely to result in a lack of local embeddedness. IKEA is not overly controloriented in its management culture, yet its strong organizational culture, together with expatriate start-up teams, and top management in subsidiaries means that the parent exerts a strong influence over the subsidiary. Crédit Lyonnais’

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management culture is control-oriented, but allows for autonomy of function within its units. Rosenzweig and Nohria’s (1994) findings do not support a relationship between control-orientation and a lack of local embeddedness.

Flows between parent company and subsidiary Presence of expatriates It is likely that if there is a high presence of expatriates from the home country in the subsidiary, it will resemble the parent more than its local environment. The literature suggests that expatriates are often the carriers of parent country culture (see also Chapter 4), and this is supported by Rosenzweig and Nohria’s findings. We have already seen that IKEA uses its expatriate start-up team to firmly establish the IKEA culture and practices, and only later to adapt to local conditions. Expatriates in Crédit Lyonnais are mainly used to develop managers’ careers within the group operation, and in part to transfer technical expertise to the subsidiaries rather than to overtly communicate a specific organizational and business culture. To better understand this relationship, the nature of the international business (Chakravarthy and Perlmutter, 1985; Bartlett and Ghoshal, 1989) and the way that the parent uses expatriation should be taken into account.

Dependence on the parent Subsidiaries that are more dependent on the parent for technical and managerial know-how will be more influenced by parent practices rather than by the practices of the subsidiary’s local environment. The fact that Rosenzweig and Nohria’s (1994) findings do not confirm such a relationship may indicate that the type of dependence on parent know-how should be taken into account. The dependence of IKEA’s subsidiaries on the parent is related to the strength of the organizational and business culture and the dependence which this creates with the headquarters in Sweden. For Crédit Lyonnais, this type of dependency does not exist. Technical know-how may be required, but this can also be obtained from the local environment by recruiting experienced bankers from competitor banks. There may be a resource dependency in other areas, such as in capital and, to a certain extent, product development.

Communication with the parent The more frequent the communication of subsidiary executives with members of the parent, the more likely the parent practices will influence the subsidiary’s practices. This is supported by Rosenzweig and Nohria’s findings. However, it is also likely to be associated with the presence of expatriates, particularly at top management levels in the subsidiaries, as is the case in IKEA. Financial reporting would be important in Crédit Lyonnais, as a major flow of information to the parent. Expatriates are likely to be present at all levels in management in the subsidiaries, and the resulting communication flows vary among subsidiaries as a result of this. The ability and willingness to establish communication flows for various purposes would also be important for sharing know-how, for example, as is suggested by Bartlett and Ghoshal’s (1989) transnational model.

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Nature of the business Rosenzweig and Nohria (1994) simply distinguish between (following Porter) global and multi-domestic industries. In global industries with strong integration forces where demand is common across countries and competition is global rather than local, it is likely that subsidiaries will be less prone to follow local practices. Subsidiaries in multi-domestic industries are more likely to need to respond to local competition, and therefore are more likely to follow local practices. Their findings did not support such a relationship, and it may be that this classification does not sufficiently distinguish the types of international strategies pursued. Crédit Lyonnais is operating in a global industry where the main competitors are international rather than domestic, yet it provides autonomy and local responsiveness to its subsidiaries who are essentially operating in local markets. IKEA is involved in multi-domestic industries. It is unusual for furniture retailing to be an international concern, and IKEA’s main competitors are domestic ones. Its main competitive advantage over them is its ‘Swedishness’. So, there are contradictory pressures to conform to local requirements while maintaining a strong culture that permeates its internal people management policies as well as its business practices. In Chapter 1, the main concern and implication for managers was how to adapt in an appropriate way to differences in cultural values between the parent organization and the subsidiary. By an examination of the various centripetal factors which are pressing hard for international integration (which may not be the same as taking an ethnocentric or parochial approach towards the management of subsidiaries), against those centrifugal factors which point towards local differentiation, it is possible to discuss an optimum stance for appropriately managing people in subsidiary operations. This should be achievable not only of charting a course through these two opposing forces, but also of drawing on the contributions that can be made from the parent and the different subsidiaries. This requires consideration of the strategic factors that should be addressed to provide the optimum balance between integration and differentiation, a consideration of cultural differences that exist among the different national operations (directly between parent and subsidiary, and among its various subsidiaries), and the relative contributions which can be made by people in the different national organizations to the global operation. Schuler, Dowling and De Cieri’s (1993) integrated strategic framework captures some of the aspects, but provides little information on the optimization of appropriate people management policies and practices within these often contradictory forces. Some of these optimizing factors are captured in Figure 2.2.

Questions for managers 1 How could Crédit Lyonnais better manage the conflicts between local differentiation and global integration in its human resource management practices? 2 What HRM systems should Crédit Lyonnais put in place in order to better utilize its human resources across its international operations?

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3 What can the management of Crédit Lyonnais learn from the experiences of the IKEA management in its internationalization process and strategy? What are the major differences and incompatibilities between the approaches of the two companies? Figure 2.2 Strategic optimizing factors in developing appropriate people management policies

Parent International strategy

Multi-domestic

Global

Respond to and encourage local differentiation

Respond to and encourage global integration

Mediated by Cultural differences Regulatory and legislative factors Economic power Ideological hegemony Nature of industry Resource dependencies Strategic choice

Prevalence of local HRM practices

Flows Communication, resources and know-how

Required interaction between subsidiaries

low

• • • •

Acquisition Local dependencies Unionization Regulatory pressures

Prevalence of HQ HRM practices

high

• Greenfield investment • High presence of expatriates

Local embeddedness Subsidiaries

An agenda for research

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Research has tended to focus on the integrating versus differentiating factors in headquarters–subsidiary operations, and has assumed that the multinational organization has been created and exists within a cultural vacuum: although some research, such as that of Rosenzweig and Nohria (1994), attempts to take as a

THE STRATEGIC ORGANIZATION

mediating factor the cultural difference between headquarter country and subsidiary country. This should perhaps be made more central in constructing hypotheses about the transfer of knowledge across countries, and the impact on the nature of management. Included within such an analysis should be an awareness of the ability of the supranational in the economic power to impose forms of control on a local subsidiary or even a national industry. This, together with the ideological hegemony of management (normally Western) knowledge, and its effects on practices, particularly in the transitional economies of the former Soviet countries and the post-colonial countries of Africa, South Asia, Latin America and the Middle East, should be a more prominent focus of research. It is an area that is dealt with more specifically in Chapters 9 and 10. Other mediating aspects, which are included in Figure 2.2, have been more thoroughly investigated. These include regulatory and legislative influences, the nature of the industry, resource dependencies (which have been discussed in connection with Rosenzweig and Nohria’s 1994 work) and strategic choice. The latter has been discussed particularly in connection with Perlmutter’s (1969), and Bartlett and Ghoshal’s (1989) work. Figure 2.2 is an attempt to pull the many strands of this chapter together, in order to propose possible relationships between factors that may be investigated in future research. Among other things, Chapters 1 and 2 have looked at the internationalization process of a Swedish and a French organization. This takes as a starting point the positioning of these organizations in their own national cultural context. Little attempt is made in the management literature to suggest that the approaches of either French or Swedish companies are in any way universal, and that their management principles can be applied anywhere in the world. As a result of the ideological hegemony of American management thought as a product of post-war economic dominance (Boyacigiller and Adler, 1991), this is quite the reverse for US human resource principles (see also Introduction). Chapter 3 now focuses on this aspect, in connection with a major American consultancy organization.

Questions for researchers 1 What is the relationship between a company’s internationalizing strategy, the culture of the home country, the culture of the host country, and the company’s people management policies and practices in the host country? 2 How can an international company successfully manage the antithesis between the need for global integration and local differentiations? How do strategies and practices vary according to company, industry and country of origin?

Note 1. I am grateful to Virginie Arnaud of Crédit Lyonnais, France for this information.

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The competences approach to human resource management is now widely used in the Western world, and is a useful means of integrating policy both vertically and horizontally. Vertically, it links an organization’s strategic objectives, operational objectives and task and behavioural requirements. It focuses on the needs of the operation which are linked with strategic objectives, and the types of tasks that have to be undertaken in order to achieve operational goals. Once the types of competence needed by people performing tasks (knowledge, skills, attitudes) are identified, the behaviour characteristics associated with these competences can be defined and identified in potential recruits to the organization. Horizontal integration can then be achieved by aligning selection, appraisal, reward and development criteria: it is logical to recruit, reward and develop people using the same competences throughout these processes. Hence the competences approach can be an effective way to ensure, throughout the organization, that people are recruited, developed and rewarded in line with the operational and strategic objectives of the organization. This chapter is wide ranging as it looks at this integrating aspect of the competences approach and applies it in the identification of international management characteristics. Before doing this, the approach is positioned within its cultural context. The competences approach has arisen mainly in an American context, and has been exported to other Anglo-Saxon countries and many other Western countries and beyond. It is born of an individualistic, competitive, short-term culture with an instrumental perspective on the value of people in organizations. It accommodates individual job descriptions, results and rewards: an emphasis that may not be apparent in Japanese organizations for example. The weaknesses of this approach must be recognized in the international context. This chapter has three main themes: the use of the competences approach; the nature of international management competences, with the focus mainly on cross-border operations in Europe; and the cultural context of the competences approach and its limitations. Its objective is to examine the relevance and applicability of this approach in other cultural settings (considering differentiation as discussed in Chapter 1) and its relevance in operationalizing international strategies across borders (integration, discussed in Chapter 2), not least through the recruitment of international staff. In order to examine this in the context of real culture and real management issues, the American firm Andersen Consulting, particularly in Europe, is considered, as an organization mediating an American management culture with other cultures in its international operations.

chapter three

The competent organization: the American model

INTERNATIONAL HRM

Andersen Consulting (Europe) From its position as a leading US and international consultancy firm with a strong presence in the field of systems integration, a strong organizational culture with uniform methods and criteria for recruiting and developing specific competences, Andersen Consulting has had to move to a more diverse business integration platform comprising both generalist and specialist competences, and taking into consideration diversity in national marketplaces (Ackenhusen and Ghosal, 1992). The firm has had to grapple with the problems of differentiation and integration described in the last chapter. In order to best utilize a range of different types of competence it has had to draw on its expertise from around the world, perhaps acting like the ‘transnational’ ideal of Bartlett and Ghoshal (1989) discussed in the last chapter. How can it best develop and integrate the range of competences required? What are the competences and capabilities required of new recruits, given the need to maintain its strong corporate culture and ways of doing things, while recognizing different levels of recruitment and moving away from recruitment from undergraduate university programmes? Are ‘Andersen Androids’ appropriate for an international firm operating in different cultural environments? Before attempting to answer these questions, it is necessary to look at the cultural context of the competences approach and the challenges of using this approach across cultures.

The American Model

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Gannon and Associates (1994) use the metaphor of the American football game to explain American culture. This combines a high level of individualism and competitive specialization with ‘huddling’ and the ceremonial celebration of perfection. While American culture celebrates the high-achieving individual and denigrates failure, it also provides evidence of collegiality (what Schwartz, 1994, calls egalitarian commitment). Innovation and modification are constantly sought, yet values and ideals are slow to change. These values Gannon and Associates (1994) describe as equality of opportunity, independence, initiative and selfreliance. Competitive specialization can be taken to the extremes of emotional intensity and aggression (the United States has the highest rate of incarceration in the world with 426 per 100,000, compared with South Africa at 333, and Japan at 45). Extroversion is an associated feature of this, with an estimated 75 per cent of Americans being extrovert on the Myers-Briggs Type Indicator (the most widely used personality questionnaire in the United States). While American football rules seek to enhance competition on the field and the league, so does US legislation such as anti-trust laws. Technology, which is developed at a fantastic rate in the United States, plays a key role in competitive specialization (both on the field and in corporate life). The team in American football is divided into squads with which players identify more readily, as they do with the nuclear family rather than the extended family. Children are raised in the nuclear family to believe that they can achieve anything if they avail themselves of the opportunities offered.

THE COMPETENT ORGANIZATION

At the same time ‘huddling’ or team play is important, but only when it is coming together (on a voluntary basis) to solve particular problems, and then going away again to compete on one’s own initiative. Huddling is quite unlike the Japanese sense of community within the corporation. It is often seen as a necessity but not an obligation. Hence cooperation, rather than working as a loner, is sought. As a result of a short-term perspective and always in a hurry to get things done (‘time is money’) these associations can be superficial and short-lived. This is reflected in standardization of work processes (such as Taylorism) and the quick fix approach (the ‘one-minute manager’). An emphasis on the ‘bottom-line’ and the achievement of results often leads to the standardized ranking of individuals and teams (students against their classmates, ranking of quarter-backs, and teams in the league). Judgements are standardized and objective, and this is often seen in corporate practices such as Management by Objectives and identification of competences of managers and key workers. A form of solidarity is seen in the celebration of perfection. Ceremonies around the football match include celebration of the team and the country, and often include a religious input (more than half of Americans are estimated to be regular churchgoers). The historical perception of America as the utopia for people who were fleeing from persecution and subjection may be reflected in this. Nationalism is highly celebrated along with the belief that anything can be achieved by the individual within a country that is revered as the best in the world. This is a particular form of ethnocentrism, where other countries are looked down on or seen as benefiting from what is given (in the form of donations and investments, to management practices) by the United States (Boyacigiller and Adler, 1991, call this parochialism). Gannon and Associates (1994) assert that this is reinforced by constant depressing news of other countries as being volatile, violent and miserable, with little positive features highlighted by the media. Most people in the United States work in the service sector, which accounts for 73 per cent of all civilian employees, one of the highest figures in the world, with only 24 per cent in the manufacturing and transportation sectors and less than 3 per cent in agriculture (Wheeler and McClendon, 1998). The American workplace is undergoing radical changes in response to greater domestic and global competition, including work systems innovations that are designed to increase productivity, reduce costs and improve quality. At the same time companies are downsizing and there is an increasing use of casual and part-time labour. New human resource practices are being implemented in work process design, employee stock ownership, outsourcing and contingent employment. However, Wheeler and McClendon (1998) typify this predominantly as a ‘lean’ production mode rather than a ‘team’ production model, where the former relies predominantly on top-down managerial and technical expertise, and the latter on decentralized decision making. This perhaps reinforces what we saw in Chapter 1, about IKEA’s difficulties in operating more consensual approaches in an American setting, where management practices reflect a more top-down approach. This may not necessarily reflect a high power distance (the United States scores 40/104 and is ranked 38/53 on Hofstede, 1980, power distance index), but more an achievement orientation of American managers who wish to influence and take control of the operational performance on which they are judged.

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Why American theories might not apply abroad In 1980, Geert Hofstede wrote a now famous article entitled ‘Motivation, leadership and organization: do American theories apply abroad?’ Hofstede (1980b) points to the exportation of management theory from the United States to other countries that may be less individualistic, less achievement oriented, have a lower (or higher) power distance and have less tolerance of uncertainty. He points to the example of job enrichment that has been advocated by such proponents as Frederick Herzberg in the United States, which is aimed at restructuring individual jobs. The other approach at that time was the development of restructuring work into group work, forming semi-autonomous teams in such countries as Sweden and Norway, and exemplified by the experiments in Volvo. He points to the two fundamental differences in approaches. In America, the humanization of work takes the form of ‘masculanization’, allowing individual performance. In Sweden and Norway, which Hofstede terms more ‘feminine’, humanization of work is oriented towards more wholesome interpersonal relationship, and de-emphasizes inter-individual competition. This cultural orientation in the Swedish context was seen in the case of IKEA in Chapter 1. In an example more salient to the current chapter Hofstede (1980b) examines the problems of introducing MBO (Management by Objectives) in other countries. Peter Drucker first advocated this as early as 1955, and it has been used extensively in American corporations to develop a results orientation focused on the ability of individuals to achieve pre-defined targets. Apart from this approach being based on a strong individualism with an emphasis on individual competences and results, Hofstede posits that MBO is grounded in the assumptions that subordinates are sufficiently independent from their superiors to negotiate objectives in a meaningful way (not too high power distance), that both are comfortable with taking the risk of not fulfilling objectives perhaps as a result of unforeseen circumstances (low uncertainty avoidance), and that individual performance is seen as important by both (high masculinity). While MBO has been adapted to the German situation quite successfully (Führung durch Zielvereinbarung – management by joint goal setting) it has acquired a stress on team objectives. Hofstede argues that replacing the arbitrary authority of the boss with mutually agreed objectives fitted well with a lower power distance and higher uncertainty avoidance, while the lower individualism provided the team emphasis. In France the story was quite different. It was introduced in the 1960s and gained some currency as a way of democratizing organizations (instead of Direction par Objectifs – DPO it became referred to as Direction Participative par Objectifs). However, in the 1970s it soon fell into disrepute, as it went against the role authority within a high power distance culture. French managers found it difficult to devolve authority through the formulation of impersonal performance objectives. The concept of achievement– ascription (Trompenaars, 1993) might also be relevant here as MBO is connected with rewarding people by promotion and in the 1980s by performance-related reward systems. This is based on achievement in the job rather than ascription of status in an organization based on qualification and seniority.

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Parochialism and universality Following in a similar vein, Nakiye Boyacigiller and Nancy Adler (1991) describe the American approach to spreading management techniques to other cultures as parochialism which is based on ignorance of others’ ways, rather than ethnocentrism which judges foreign ways as inferior. It simply assumes that what works well in the American culture will naturally work well anywhere in the world. The predominance of the United States in the world economy has supported and reinforced these assumptions, and has meant that most organizational theory was in fact ‘made in the USA’. Some of the problems occur in this assumption of universality of organizational theory and management practice because of cultural differences between the originating culture (USA) and the recipient culture. Boyacigiller and Adler particularly point out the implications of: • Free will versus determinism: theories and practices of training and development (and presumably other areas such as MBO, incentive schemes) assume that individuals are capable of changing and affecting the work environment, whereas many cultures, such as those in Africa and other emerging countries, are more deterministic, distrusting of authority and more accepting of fate or the will of God. • Individualism–collectivism: Americans define themselves by their personal achievements and personal characteristics rather than their place and obligations within the group or collective. Hence corporate selection is based on practices that select strangers through an assessment of personal achievement rather than by hiring people you know such as relatives, whom you can trust and upon whom family pressure may be placed if they do not fit in. • High–low context: The low context culture of the United States again emphasizes the impersonal nature of relations and communication in organizations and the contractual nature of employment relations. High context cultures put more faith in face-to-face personal agreement than written agreements and contracts. Little is explicitly coded, and expectations are more implicitly shared. Performance expectations may therefore be more implicit in Japanese organizations, whereas in American organizations these are spelt out in performance criteria and competences statements.

Management competences approach The idea of management ‘competences’ is drawn from the basic assumptions of the skills approach in social psychology that suggests we can understand social action by looking at its component parts. One of the best illustrations of this is the skills model of the Oxford social psychologist Michael Argyle (1967) (Figure 3.1). This is seen as a conscious process directed towards making changes in the environment. It requires some sort of motivation in order to drive the process, and specific attitudes (particularly towards intended goals) may influence the process and its outcome. It requires an ability to perceive the changes to be made, to understand how they can be achieved, and the ability to apply this understanding

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INTERNATIONAL HRM Figure 3.1 Argyle’s skills model (adapted from Argyle, 1967)

Perception

Motivation attitudes

Translation

Feedback

Changes in outside world

Behaviour

to the perceived situation and to formulate whatever action is required. We can monitor the actual changes made and compare them with our intentions. Through our ability to perceive what we are doing, we can then make suitable adjustments to our behaviour to try to ensure that the desired result is achieved. The factors involved in such a ‘skilled performance’ (in Argyle’s, 1967, terms) are therefore: • the motivation to perform (as well as the attitudes towards the performance and subject of the performance); • knowledge and understanding of what is required; • the ability (capability) to translate knowledge into specific behaviour; • the performance itself which provides evidence that the above three factors are present. The concept of ‘skills’ has a long pedigree. The latter-day equivalent of such an approach (which is largely based in behavioural and reductionist psychology) is the concept of ‘management competences’. Thus Boyatzis (1982) sees competences as an effective mix of motives, traits, skills, aspects of one’s self-image or social role, or the body of knowledge used by individuals. Constable (1988: 19) more specifically sees competence as ‘the ability to use knowledge and skills effectively in the performance of a managerial role. All management skills must, therefore, be competences when performed effectively.’ He points to a more tangible list of attributes such as the ability to make sound judgements, creativity, willingness to take risks, and a high energy level. He defines competence (Constable, 1988, following Boyatzis’, 1982, definition of ‘skills’) as: ‘the ability to demonstrate a system or sequence of behaviour as a function related to attaining a performance goal’. This is in fact very close to the concept of skills (or skilled performance) posited by Argyle (1967) above. Boyatzis focuses on different types of competences by conceptualizing them in terms of ‘types’ and ‘levels’. The former are associated with various aspects of behaviour and an individual’s ability to demonstrate such behaviour. So, ‘planning’ competence is associated with ‘setting goals’, ‘assessing risk’ and developing a sequence of goal-related activities. ‘Levels’ of abstraction are seen by Boyatzis in terms of: • the motive and trait level; • the self image and social role level; and

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• the skills level

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At the motive and trait level ‘planning’ might be reflected in a desire to achieve certain goals; at the self-image and social level this might entail having a selfimage of thinking ahead and being positive, and this would be projected in the manager’s social role; and at the skills level the manager would perhaps develop a plan of action, assess risk and implement the plan through a series of behaviours. By using the ‘type’ and ‘level’ concept Boyatzis was able empirically to derive a number of competence clusters which included ‘goal and action management’, leadership, human resource management, ‘directing subordinates’, ‘focus on other’, and ‘specialized knowledge’. The identification of generic management competences that are applicable to good managers in any situation has become commonplace, and is used extensively to select and develop managers in American and other Anglo-Saxon organizations. A good example of this is the generic list of competences used by the American Management Association (Table 3.1). Table 3.1 American Management Association Competence Model (adapted from Kubr and Abell, 1998) Goal and action management cluster Efficiency orientation: concern with doing something better Proactivity: disposition towards taking action to accomplish something Concern with impact: concern with the symbols and implements of power in order to have impact on others Diagnostic use of concepts: use of a person’s previously held concepts to explain and interpret situations Directing subordinates cluster Use of unilateral power: use of forms of influence to obtain compliance Developing others: ability to provide performance feedback and other help needed to improve performance Spontaneity: ability to express oneself freely and easily Human resource management cluster Accurate self-assessment: realistic and grounded view of oneself Self-control: ability to inhibit personal needs in service of organizational goals Stamina and adaptability: the energy to sustain long hours of work and the flexibility orientation to adapt to changes in life and the organizational environment Perceptual objectivity: ability to be relatively objective rather than limited by excessive subjectivity or personal biases Positive regard: ability to express a positive belief in others Managing group process: ability to stimulate others to work effectively in a group setting Use of socializing power: use of influence to build alliances, networks or coalitions Leadership cluster Self-confidence: ability consistently to display decisiveness or presence Conceptualization: use of concepts de novo to identify a pattern in an assortment of information Logical thought: a thought process in which a person orders events in a causal sequence Use of oral presentation: ability to make effective oral presentations to others

The identification of competences required to do a particular job (such as finance manager in the motor industry, or indeed consultant in the firm of Andersen Consulting) has become central to the way American companies recruit, appraise, train, reward and promote managers. This is apparent at industry level in the UK Management Charter Initiative that charts managers’ competences in

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terms of key purpose (organizational objective), key role (managing people, managing finance, etc.), units of competence, elements of competence, and performance criteria and range indicators. Hence a key purpose such as ‘to achieve the organization’s objectives and continuously improve its performance’ will be traced down to the individual’s behavioural level, and performance will be judged on prescribed criteria. This approach has filtered down to lower organizational levels in the UK where employees in different job functions may demonstrate competences in prescribed areas and gain a National Vocational Qualification at different levels. For example, competences in retailing prescribed at level 2 (LCCIEB, 1993) require that at foundation level retail operatives are able to: 1 provide a service to the customer 2 contribute to the maintenance of health and safety in the retail workplace 3 contribute to good housekeeping routines 4 maintain relationships in the retail workplace 5 contribute to the security of the retail workplace 6 handle stock 7 process the sale 8 contribute to the communications within the organization 9 deal with returned goods and complaints 10 display and merchandise stock. The emphasis is on reducing competences to operational and behavioural elements, in order to produce a detailed description of what is required of the employee in performing a particular job. Employees are therefore fitted into roles or positions (by selection) that have been designed to meet operational objectives, which ultimately serve the purpose of meeting strategic organizational goals. With this set of descriptions, organizations are then able to evaluate an individual’s ability to acquire these particular sets of attributes, and reward employees on the basis of their using them to meet operational objectives. Individuals can also be trained in these competences where they have a deficiency. Thus selection, appraisal, reward, promotion and training systems can be linked into human resource management systems aimed at the achievement of organizational goals. The use of the competences model is seductive, and it has been widely applied, not simply in domestic operations but for the identification of competences required by international managers and other key employees.

European and international competences

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Much discussion in the early 1990s with the advent of the European common market integration in 1992 revolved around the issue of what makes an effective Euromanager. Much of the language used has been taken from the competences model. As part of this debate the Financial Times held a conference in London on ‘Creating a Euro-workforce in the ‘90s’. The human resource directors of Ford of Europe and American Express offered a view of their own operations in Europe.

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Ford operates in 15 different European countries. It has, over the last 20 years, developed the policy that managers who have a national responsibility also have a European responsibility, so that the director of engineering in Germany is also the executive responsible for coordinating the engineering of engine and transmission systems in the European R&D locations. This principle is established down to middle management level. Thus managers have learned to work in a European environment, taking account of different legal requirements, customs and practice, as well as working with cross-cultural teams. There is also the practice of assigning managers to work in different foreign locations: it is normal to find a senior British manager working in Cologne or a German working in Valencia. Business is conducted in the local language, but English is the language of the company. With growing globalism and the need to see its European managers as part of the ‘global village’, these practices within Europe are likely to be extended to the world arena. All of this means that the job of the international manager in Ford will be characterized by: • accelerating change; • increasing technical complexity of decision making; • a need to exert influence and leadership in a participative manner rather than through the traditional command structure; • learning from experience, implementing continuous improvement, and the need to take a systems view of the business rather than a narrow specialist or functional view. Successful international managers will therefore be measured by their ability to anticipate change and master complexity and paradox. American Express sees that it has globally oriented products that should be capable of delivery locally, and so must be locally relevant. In order to meet the challenges of a new Europe, they do not want to create a bureaucratic structure that ossifies their management talent. Instead they have set the following goals for organizational development: • Create a refreshed and common vision and values across Europe. • Optimize the organization and its resources both locally and internationally. • Ensure continued excellence in people management. • Consistently develop management talent. • Enhance the international team by recruiting the best people. • Provide the best employee relations environment. In their international managers they are looking for the following competences: • leadership skills: an ability to create business vision, direction and values which motivate others; • the intellect, flexibility, courage and imagination to recognize and respond to the rapid pace of change;

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• the cultivation of a broad knowledge of the history, culture, law and languages of Europe, and the ability to set aside nationalism and its prejudices and stereotypes; • willingness to be a team member who can work in multinational project groups and be prepared to move to different countries and cultures. In order to obtain a more general view of cross-border competences Ashridge Management College undertook a survey of nearly 50 American, British and Japanese international companies to determine which characteristics of international management they most valued (Barnham and Oates, 1991). This resulted in the following list of broad competences in order of perceived importance: • strategic awareness • adaptability in new situations • sensitivity to different cultures • ability to work in international teams • language skills • understanding international marketing • relationship skills • international negotiating skills • self-reliance • high task-orientation • open, non-judgmental personality • understanding of international finance • awareness of own culture There are, however, three problems in the straightforward acceptance of the relevance of international competences in selecting, rewarding and developing key employees: differences in the ways managers and other key employees are regarded in different countries; the different degrees of internationalization of international companies; and problems inherent within the competences model itself, both methodological and cultural.

The cultural regard for managers and their competences

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Within a global marketplace, international managers must by necessity be in competition, in multinational companies, with their counterparts in Europe, North America and Japan and other areas, for top international jobs. However, Adler (1991) remarks that what is a relevant management attribute for reaching the top in one country may not be seen as relevant in another. Drawing on the research of Derr and Laurent (Derr, 1986; Laurent, 1986; Derr and Laurent, 1987), national differences can be identified as follows:

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North Americans: must be seen to have ambition and drive within companies that value entrepreneurs; French: must be labelled as high potential, and be able to manage power relationships and to work within an organizational system which is seen as a hierarchy of levels of power, depending on their place within it; Germans: believe in creativity as essential for success, within an organization that is viewed as a coordinated network comprising individuals who make decisions based on their professional expertise; British: must create the right image and get noticed; see interpersonal skills as important within the organization which is viewed as a network of relationships where things are achieved by influencing others by negotiation and communication. So while, for example, German companies may highly value technical expertise and creativity, French and British companies may see managers with these qualities as pure technicians. Similarly, French and British companies may view the qualities of entrepreneurship valued by the North Americans, as highly disruptive. For a manager pursuing a career internationally, this may have consequences for the way his or her potential for development is seen by particular companies in specific home bases. For the multinational company developing its managers across a number of countries, this may also have implications for the way they select top management talent and how they develop management potential within and between the various countries within which they operate.

Different degrees of internationalization of companies Perhaps one of the strengths of the competences approach is that if integrated properly across the human resource functions it should actually reflect the operating strategy of the organization. The reason why particular competences are required of managers should translate into the operating and strategic requirements of the organization. The different operating practices and international personnel policies of multinational companies will therefore reflect on the regard for international management competences and the need to select and develop them. Perlmutter’s (for example in Chakravarthy and Perlmutter, 1985) identification of four different policies of multinational companies has already been discussed: Ethnocentric: executives from the home country are developed for the key positions in all countries where the multinational operates; such is the case with many Japanese multinationals. Polycentric: executives from the local countries within which the multinational operates are developed for key positions in their own country. Regiocentric: executives within a particular region are developed for posts anywhere in that region, for example in the case of companies positioned within the European Community. Gillette is one example of this approach.

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Geocentric: the best people anywhere in the world are developed for key posts anywhere in the world, as in the case of IBM (see also Hodgetts and Luthans, 1991). The fact that multinationals have different policies regarding the development and deployment of key managers has implications in itself for the way ‘international’ managers are selected and developed. This point is worth looking at in more depth using the example of Shell International. T. W. Liardet, the then head of management resourcing and development of Shell International (Financial Times Conference: Creating a Euro-workforce in the 90’s, London, 1990), outlined the benefits seen by the company of an international management development system as follows: • to enable a balance and breadth of global management understanding at senior levels of management; • to enable the development of managers in depth as well as in breadth; • to gain top management involvement by ensuring that managers know the global resources of the organization; • to test high potential managers by throwing them in at the deep end; • to encourage a drive for change by developing new ideas; • to facilitate a cultural and functional interchange in order to encourage managers to take a fresh look at problems and issues; • to stimulate individuals’ career development by providing challenges and encouraging ‘rebirth’; • to promote and effect the cohesion of the organization: the corporate glue. International management development is therefore seen as a natural process for managers aiming for top management. The process of international development described by Liardet in Shell consists of four stages: First stage within the operating company: initial training and testing takes place, together with the development of professional expertise. There is interfunctional posting within the immediate operating company, and managers are ranked in terms of their performance and potential in the local pool of junior managers. Second stage within the region: the higher-ranked staff from the local pool progress to this stage where they are posted within the region to facilitate their broadening. Professional development training is provided, and testing for management ability. Ranking of performance and potential is then undertaken within this wider, regional pool. Third stage across regions and in central office locations: only the highest-ranked staff from the regional pool go through to this stage, where postings are interregional and in central offices, and professional and general management development is undertaken at group level. Ranking of performance and potential is here undertaken at full international level. Only then do the most outstanding individuals go through to the fourth stage.

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Fourth stage at group level: general group management.

THE COMPETENT ORGANIZATION

From a survey of international management by a research group at Ashridge Management College in England, Barnham and Oates (1991) report on an approach to international management development taken by the Hong Kong and Shanghai Banking Corporation. The fundamental approach to international development within a management career is different to that seen in Shell. Hong Kong and Shanghai Banking Corporation (HSBC) has a dual career structure for its managers. It recruits graduates who specifically choose a career within their own country (resident officers) or who choose an international career (international officers). Both categories of management recruits undergo the same six-month executive development programme, with a combination of technical and interpersonal skills and the opportunity to develop cultural sensitivity and synergy. Drawing recruits from all over the world on the same programme, with as many as ten different nationalities living and working together during this initial six months, often provides contacts that last a working lifetime. The training programme is divided into four stages. The first is an orientation and team-building process over a two-day seminar designed to develop cultural awareness. This provides the basis for understanding how cultural background shapes individuals’ values, attitudes and behaviour, and the way people from other cultures perceive them. The second stage is a ten-day outdoor development course designed to build team skills, cultural understanding and synergy in situations that require trust, participation and interpersonal skills. This is held in the Hong Kong New Territories. The next stage is a one-week course in interpersonal skills development. The fourth stage is an international assignment in order for recruits to gain experience in a branch as well as working in a different culture, reinforcing the learning undertaken in the first three stages. The main aim of this is to develop cultural awareness and sensitivity. So the approach of HSBC is to expose management trainees at an early stage in their career to cross-culture differences, which will stand them in good stead for the remainder of their careers, whether they are to work internationally or domestically. This contrasts to the approach of Shell, which is to provide a wider geographical exposure for managers as they progress up the career ladder. Different competences are valued and different approaches to developing management competences are applied in different organizations, depending to a large extent on their view of international management and how this fits in with their overall international strategy and positioning.

Problems inherent within the competences model Davison (in an unpublished paper cited in Jackson, 1993c) argues that the idea of ‘competences’ of international managers may not be sufficient to gain an understanding of the requirements for managing across cultures. She suggests that what is needed is an ability to: deal with frustrations, isolation, failure; and to learn how to network, gain support and anticipate differences. She adds that such qualities as ‘helicopter view’ (a famous competence invented by Shell), intuition and cultural sensitivity may be difficult to directly teach and acquire. So, are the qualities needed of international managers un-trainable ‘traits’? However, Davison adds, interpersonal skills can be learned at the level of managing intercultural teams no matter what personality traits one possesses. This, together

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with an understanding of oneself as well as the other person’s culture, is something that can be developed. To take this further, the following related methodological problems seem to be inherent within the concept of ‘management competences’ (Jackson, 1993b):

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Firstly, there is little coherent theory or theories underpinning the competences concept. Rather, it is (or they are) pragmatically and/or empirically based. The competences approach is based on the construction of typologies derived from empirical work with little theoretical justification or explication of an underlying framework or paradigm. Such projects as the Management Charter Initiative in the UK or the American Management Association Competences Model, and the use of the competences approach for assessment centres and training seem to reinforce this practical-pragmatic-empirical orientation. There is therefore very little reflection on the validity of the whole approach, and in particular this makes it susceptible to problems of cross-cultural transfers. Secondly, generic competences typologies suffer from stating the obvious and/or from imposing an externally conceived structure on performance in specific organizations that may be inappropriate. Conversely, specific competences lists that are generated internally (or by external consultants) may suffer from ‘reinventing the wheel’. In either case they may add little to our understanding of how managers perform well. It is perhaps meaningless to say that to be an effective manager you need to be able to communicate, or you need to make decisions. This does not really tell us anything about what makes a good manager in a particular organizational setting. The ‘skills language’ approach of Hirsh and Bevan (1988) does a lot to dispel criticism of this nature, as it looks at the interpretation of ‘communication’ or ‘decision making’, for example, in each organization. Thirdly, the concept of competences is based on reductionist principles, that is, it tries to analyse complex human action by taking it apart. The whole is ignored in favour of the parts. The intuitive is rejected in favour of dissection and analysis of the components. This is a major criticism levelled against the social skills approach, which was introduced above (pp. 63–64) as a forerunner to the competences movement. Singleton, Spurgeon and Stammers (1979) point out that this approach follows the traditional systematic approach to analysis, that is, studying something by taking it apart. They point particularly to the difficulty in doing this with complex social phenomena that are interconnected in an intricate way. Another aspect of this, they say, is knowing where to stop in this reduction process: knowing when you have reached the basic unit of analysis. The overall problem, though, is that with social phenomena we are dealing with wholes (gestalts) and to take these apart leads to loss of meaning. Polanyi (1966) uses an analogy of a police photofit, where we can choose from thousands of pieces of physiognomy to build up a picture of ‘a face’, but it is still not quite right, some inexplicable quality is missing. Pye (1991) notes that this is the same as with management competences. The ‘component-parts assembly’ approach to management training, for example, is based on the assumption that we can build up an effective manager by assembling the parts. There will still be something missing! Pye (1991) suggests that this something may be ‘intuitive judgement’, which has materialized in data collected from managers by Pye as expressions such as ‘fairness’, ‘sparkle’,

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imagination’ and ‘feel’. Although it could conceivably be argued that this ‘intuitive’ feel could be added to our list of competences, it is none the less difficult to define conceptually, behaviourally and by outcome. Fourthly, there is a tendency to assume a (causal) link between a set of attributes, behaviours and management results, whilst little is done to actually establish this link. This may be because it is difficult or impossible to establish. However, it is also difficult to determine what the end result should be in this link. Pye (1991: 113) adds that with management competences the problem seems to be that ‘effective managing is known only by its performance and is evaluated against prior performance’. This follows Lombardo and McCall (1982: 62) who point out that ‘effectiveness is a function of who defines it’. Performance is essentially relative and a matter of ‘policy’ within an organization. This is perhaps more complex than simply an organization determining a formal policy of what constitutes management performance. Often there is no such clear-cut policy, there is often no reference to objective measures of results in performance appraisal documents. Even if there were clear and operational policies, these would still be open to interpretation by individual ‘stakeholders’ within an organizational unit. The perceptions of what constitutes good performance by a manager may be subject to a number of perceptions which may coincide or not (the use of 360-degree appraisal systems might overcome some of these problems, but in the cultural context of some country operations peer and subordinate assessment may be wholly inappropriate). These perceptions may be based on experience, a ‘gut feel’, and have no definite objective base. Similarly, these judgements may not be subject to ‘dissection’, may not be taken apart for analysis, and put back together via a training programme to create an effective manager. In particular the above discussion regarding different national perceptions of what a manager is may make transfer of competences from one culture to the other very difficult. Finally, the competences approach is static, relating ‘what is’ rather than describing a process. This final point is related to a ‘snapshot’ methodology inherent in it. This is an important criticism when applying competences to management development and selection methods that are based on lists of competences that were collected historically. It is true that you can add to the list such ‘competences’ as ‘adaptability’, ‘ability to manage change’ and ‘flexibility’, to allow for the fact that managers are working in a changing environment, but to what extent is this moving away from the real task of trying to find out what performance characteristics are required in the future as well as now? When the basis of the competences approach is examined, it reveals problems in the cross-cultural transfer of the approach itself. These relate specifically to the distinction made in the Introduction to this book between instrumental approaches to conceptualizing and managing people in organizations, and humanistic approaches. The competences approach is firmly rooted in the instrumental paradigm. The needs and objectives of the organization are paramount. Strategic objectives are translated into operational objectives. Operational competences are then identified which relate to the achievement of operational objectives. Characteristics of high performers are then identified as attributes, which can normally be assessed in some way. The presence of competences is identified in individuals in terms of requirements for a job which are defined by a detailed job description and specification of what is required of the individual in that job.

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These may be specified as individual objectives and targets. If they achieve objectives individuals may be rewarded. Individuals are selected on the basis of ability to demonstrate that they have the required competences for the job (or at least if they do not have these in their entirety, that they can at least be trained to meet the requirements of the job). Hence these competences are used as the basis for recruitment, development, reward and promotion (often organizations do not coordinate their various human resource management functions so efficiently, but this is the ideal). By contrasting the American model of management and organization to the Japanese, some of the issues may be drawn out. Olie (1990) provides an example of American managers of a Japanese banking subsidiary in the United States who had great difficulty managing with no clearly stated and measurable performance targets from their Japanese top management. The Japanese bankers were frustrated that they could not communicate their philosophy of banking, the meaning of the business to them, their responsibilities towards the local communities and relations with customers and employees, and with competitors and the role of the bank in the world at large. They felt that if the American managers could absorb all of this then they would understand. Then they could themselves define what their objectives should be in any situation, and they would never have to be given a target. After Thurley and Widenius (1989), contrasts between the American and the Japanese models of management can be identified (Table 3.2). Table 3.2 American and Japanese models of management (after Thurley and Widenius, 1989)

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American

Japanese

Task performance Job definition Individualism Human relations Rational management Strategic management Specialist know-how

Job rotation Generalist roles Collectivism Employee protection Rationalism Pragmatism Work-group innovation

Hence, American management theory is firmly built on the tenets of scientific management (Thurley and Widenius, 1989), using a systematic approach to improving task performance. An individualist approach allows classical management theory to define roles in terms of specific jobs and responsibilities, where managers are individuals with their own interests and personalities. In order to serve organizational goals group norms are fostered through a human relations approach. Change management requires a planned approach to changing structures and cultures. Organizations should define the business strategies required to achieve market position and design structures to fit these needs. Japanese management emphasizes equality as the basis for competition and cooperation (Thurley and Widenius, 1989), basing its practice on collective responsibility (all members feel responsible for the organization). Individuals do not own their jobs, as they may have to do anything, needing training to perform a variety of jobs. In this spirit, employees should be trusted to get on with their

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jobs and should have their potential stimulated. Employees should be protected by the organization as they are vulnerable, and life careers should be planned. There is a recognition that everything changes and management should be pragmatic, and flexible enough to adapt to the new circumstances. Finally, the work ethic is connected with the individual’s interaction with the work group. It is through the work group that employees gain their identity and associate their activity with the michi, or ‘the way’. These contextual ‘rules’ and cultures have implications for individuals’ motives and objectives, and for their management behaviour. It also influences the way we see that behaviour. For example, it is difficult to speak of individual management competences in the Japanese collectivist context. Thurley and Widenius (1989) therefore characterize these differences between Japanese and American management theory and practice as: work security versus individual freedom; organizational loyalty versus job competence; consultation and involvement versus management authority; and work group innovation versus specialist know-how. Conclusions following this discussion should not reject the use of competences in management selection and development, as obviously there are practical uses in conceptualizing the aspects of management that can be selected and developed. There are limitations, both conceptually and methodologically, not least of all in the lack of a theoretical underpinning, which has implications for such problems as establishing cause–effect relationships between managers’ capabilities and management results. Other aspects – which are often not dealt with explicitly when considering management competences, and are fundamental to a discussion of management performance – are the ways managers perform (by cultural rules and stylistic interpretations of these rules) and why managers perform (the structure and processes of their motivation to perform). Within this context of the competences approach, which has implications for selection, appraisal, training and development, and reward systems, we now focus on the selection of managers in an international situation, in the context of the American firm, Andersen Consulting.

Implications for managers: selection of managers and key staff Andersen Consulting (Ackenhusen and Ghosal, 1992) has traditionally recruited young graduates and trained them rigorously in a uniform training programme initially at their training school, and then periodically (spending some 10 per cent of revenue on training). This ensured that all recruits were instilled in the Andersen way of doing things. By moving from an IT base to business integration, a need arose to integrate expertise in operations, strategy, technology and organization (particularly the management of change). This meant they had a need for specialization as well as general competences across the four areas. To a certain extent they could bring in people from other offices in other countries, utilizing specific expertise in a transnational manner. But this often led to conflicts with national operations. Also there were differences in national markets: for example, the French market was more clearly differentiated between IT consulting and management consulting. The corporate IT function in French corporations

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was seen as having a lower status than in the UK. The UK market in IT was prepared to pay higher prices than in France. This all led to differences in recruitment in France. IT consultants were not drawn from the grandes écoles but the business integration consultants were. In Britain, where the two markets were not differentiated, consultants were drawn from the top business schools. This in itself, with a need to develop more specialization, was different to the classical Andersen recruitment of first-degree holders. Even more so with the need to recruit specialists in the area of change management, experienced individuals were brought in. In the UK Andersen broke with its tradition of growing organically, and acquired a small manufacturing consulting company to enhance its skills base in operations. Such specialists did not want to go through the traditional initial six-week training programme. At the same time the generalists who were recruited and trained in the traditional way felt that the specialists did not know how to do things in the Andersen way, causing some mistrust. The ‘midwest’ culture discouraged gurus or luminaries, and individual aggrandizement was disparaged. The need to utilize people with different specializations in different parts of the world also led to recruitment of people willing and able to participate in international work, and be deployed to specific projects anywhere in the world. The competences required to meet these various needs therefore became complex: generalists (Andersen traditionalist) versus specialists (not steeped in the Andersen way), national market (e.g. France) versus national market (e.g. UK), specialists national versus specialists transnational. Later, differential recruitment became more formalized, so that recruits entering Systems Integration were still young university graduates, and were put through the same rigorous six-week training programme at Andersen Consulting’s 151-acre campus in St Charles, Illinois. Recruits to the Strategic Services division were obtained from the business schools, with an MBA and often with prior work or consultancy experience. Often, at a more senior level, consultants were recruited from competitor firms (Nanda and Yoshino, 1995). These different recruits were also more sharply differentiated by the different compensation levels in favour of strategic services consultants that Nanda and Yoshino report. Although sharing common human resource management philosophy and practices across the country practices, there was a growing awareness of country differences in decision and consultancy practices, if not competences. Increasingly Andersen Consultants have been organized on a matrix basis, with core competences in specific areas (strategy, change management, technology, process) being used across geographical and functional lines of business (Turpin and Hennessey 1999). From the discussion in this chapter it should be apparent that the competences model, which is rooted in an instrumental paradigm of human resource management, is a useful tool for identifying the nature of ‘human capital’ required to fulfil the objectives of the organization. This suffers problems when an organization goes international. Firstly, those competences that were adequate in the domestic context may no longer be adequate. From a discussion of the requirements of managers in the European Union at the beginning of the 1990s, it can be seen that different types of requirement involving cultural fluency across borders become necessary. Being able to identify individuals who can meet the requirements to work across cultures may be problematic, as Andersen Consulting found out: this disrupted domestic operations and

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somewhat confounded the idea of a transnational organization. In addition, not only must international competences be identified, but different competences in different countries may be required, as the work of Derr and Laurent (Derr, 1986; Laurent, 1986; Derr and Laurent, 1987) pointed out, and as the experience of Andersen’s operations in France identified. If we follow through the logic of their research findings, the antitheses between selecting and developing generalists versus specialists may alter from country to country, where key employees in Germany may be recruited for their specialist technical skills, and in Britain for their general managerial skills. Within the logic of an instrumental paradigm, the competences approach may be problematic, as we noted above. The ‘photofit’ approach to selection/ development may miss out vital components (a person’s integrity for example is difficult to measure), especially when working across cultures, as Davison has pointed out. The cause–effect problem may also be an issue, and establishing predictive validity for even sophisticated selection processes such as assessment centres can be problematic. When companies venture outside an individualistic/achievement culture, emphasis on reward based on the use of competences (e.g. in the case of MBO in France cited by Hofstede, 1980b), and indeed the importance of systematically breaking down job functions into required competences, may no longer be relevant. This may have become an art form in Britain (e.g. the Management Charter Initiative) but is largely absent from the thinking of such companies as IKEA. The competences approach seems symptomatic of the American emphasis on the bottom-line and the achievement of results leading to the standardized ranking of individuals (Gannon and Associates, 1994) of the quick fix approach (e.g. The ‘one-minute manager’ of Kenneth Blanchard, [e.g. Blanchard and Johnson, 2000]) and of the excellence movement (e.g. Peters and Waterman, 1982). When companies venture outside cultures that place an emphasis on instrumental views of people in organizations, the concept of individual competences seems illogical. If the logic is to ensure best fit of individuals to particular job roles, what happens when the roles are fluid and fit around the development needs of individuals and team, such as in Japanese management (e.g. Whitehill, 1991)? Different approaches may therefore be necessary when operating in countries that may have a more humanistic view of people in organizations, as may be the case in Africa, Asia and Latin America.

Questions for managers 1 How can Andersen Consulting develop and integrate the range of competences it requires for its international operations? 2 What are the competences and capabilities required of new recruits to Andersen Consulting, given the need to maintain its strong corporate culture and ways of doing things? 3 How relevant is the competences approach for Andersen Consulting working outside Anglo-Saxon cultures? 4 What are the alternatives to the competences approach?

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An agenda for research Simplistically, it would be easy to say that the future research agenda in the area of competences would be to investigate more fully differences in management competences among different cultures. The work of Derr (1986), Laurent (1986) and Derr and Laurent (1987) points in this direction in identifying those characteristics of managers that companies from different countries favour. Perhaps a more challenging research agenda is to investigate the uses, misuses, and absence of this approach in different countries. So far there has been little systematic research on this, despite there being many comparative studies on human resource management practices in different countries. Although Nordhaug (1998) firmly places the conceptual foundation of the competences approach in human-capital theory, he does little to break out of this paradigm in suggesting a classificatory framework for research, other than to address the shortcomings of task-specific competences by introducing firm-specific competences to allow for more adaptability and flexibility, and to cope with the issue of changing needs and redundant competences. This provides a notion of organizational competences. Although this may be moving over to a macro-view, and have similarities to the more holistic approach discernible in Japanese management systems, it may still be missing the point. The relationship among cultural values (e.g. individualism–collectivism, masculinity–femininity, universalism– particularism), cognitive systems (e.g. instrumental–humanistic perceptions of human value) and relationship between job and employee as manifested in selection and development practices needs to be investigated. Hence, it may be proposed that: • in cultures that are individualistic (propensity to reward individual performance: Hofstede, 1980b), masculine (propensity to emphasize performance and results: Hofstede, 1980b), and universalistic (propensity to employ strangers based on a pre-defined set of rules: Trompenaars, 1993) it is more likely that managers will perceive individuals in an instrumental way (as a means to the ends of organization: Jackson, 1999), and therefore develop systematic means of fitting the individual to the job (competences approach); • in cultures that are collectivistic (propensity to value group performance, and reward conformance to the group: Hofstede, 1980b), feminine (propensity to emphasize nurturing and social values: Hofstede, 1980b), and particularistic (propensity to employ people from in-group such as family, who are known and upon whom group pressure can be exerted: Trompenaars, 1993), it is more likely that managers will perceive individuals in a humanistic way (as having a value in their own right and as group members: Jackson, 1999), and therefore develop ways of fitting the job around the individual as part of a group, and developing them within it.

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Perhaps more interesting (and more challenging) is to investigate the tensions created by the antithesis of the two approaches when they come together through, for example, Western acquisitions in emerging countries. We have already seen the tensions created in two relatively culturally close countries (Sweden and USA), where IKEA did not systematically identify competences, and performance

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related to this. Research on these issues will enhance the ability of managers working across cultures to manage people in other cultures more effectively, or at least to understand to what extent the competences approach may be useful, needing to be adapted or modified, or needing to be rethought altogether.

Questions for researchers 1 What is the relationship between national culture and the use of the competences approach? 2 What different concepts and approaches are used in countries with dissimilar cultures? 3 How prevalent is the competences approach, and what is its perceived relevance in different countries? 4 How do management competences required for managers by companies vary across different countries?

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The Dutch model: the missionary spirit The Netherlands is better known for its exploits outside its borders than within them. In historical times it was recognized for its foreign policies: Europe’s leading trading nation (with England as its chief commercial rival), a navy four times the size of that of England in 1650, and its growth as a major colonial power, particularly after the decline of Spanish and Portuguese competition after 1588. The Dutch East India Company was founded in 1602, and from this grew a rich and worldwide commercial empire. In the same year the world’s first stock exchange was established in Amsterdam. With the spread of Dutch commercial influence in the world it is not surprising that Dutch missionary work followed hard on its heels. Not only was the Dutch Reformed Church active in this respect, but the person chosen to head the newly formed London Missionary Society’s first mission in South Africa in 1794, and one of this country’s eminent missionaries, was a Dutchman, Johannes van der Kemp (Mostert, 1992). It is perhaps no accident that one of the most prominent international cross-cultural academics, Geert Hofstede, is Dutch; one of the best known international cross-cultural consultants, Fons Trompenaars, is Dutch (and also French), and that the missionary spirit is also alive and well in one of the world’s renowned international organizations, Royal Dutch/Shell. Not only has the Netherlands been a major force in going out into the world, it has also developed a receptive attitude to immigration and a tolerance of difference in a society composed of different strands in such areas as religion, race and lifestyles. The Netherlands is largely ignored in the comparative literature on management and human resources. Garrison and Verveen’s (1994) study is an exception. Although one of the smallest European countries, it has considerable economic strength built on its industrial achievements as well as its position as a major trading nation (reported to be ranked sixth in the world in the 1992 World Competitive Report). It has strong social legislation and labour law. Some companies operating in the Netherlands have seen this as uncompetitive and have shifted some operations to other countries, again reinforcing a trend towards internationalization. Hofstede’s (1980a) cultural dimensions depict the Netherlands as medium to low in uncertainty avoidance, high in individualism and fairly low in power distance. Perhaps what distinguishes the culture and groups it with the Scandinavian cultures is its high femininity: its unassuming, low-profile organizational culture.

chapter four

The missionary organization: the Dutch model

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The objective of this chapter is to examine expatriation in the context of the strategic positioning of international enterprises and the careers of international personnel. It is difficult to say that Shell is a typical Dutch company, but it may be possible to propose that its rationale and modus operandi are within the Dutch missionary spirit. This international company provides the real context for exploring the many aspects and issues of expatriation.

An American company in the Netherlands

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One of the few case studies to depict the problems of an American company operating in the Netherlands is the company called ‘Manners Europe’ (DiStefano, 1992), a ‘do-it-yourself’ retail company that found discrepancies between the achievement and production orientation in the United States and the Netherlands. This was reflected in the operation of an MBO system tied to compensation. Apart from the incremental tax system operating in Netherlands, which the Americans felt went against incentivizing people, there was a perception that the Dutch had a different view of compensation. This view was articulated as an assumption that everyone gives 100 per cent of his or her effort all the time. Therefore they should be paid 100 per cent as a normal exchange, and not given a bonus. The company also had sales staff refuse commission arrangements to work for less on a nonincentive basis. DiStefano (1992) also tells of an incident with two accountants in the company, one in his late teens who produced five times the work of the other: an older man in his late twenties with family responsibilities. When the Dutch chief accountant and director of administration recommended a greater increase for the older person in the salary review, the American director of finance refused to give it, as the older man was considered a poor performer and refused to work overtime (DiStefano notes a general problem in obtaining employees’ commitment to work overtime when it was necessary: the Dutch staff seemed to be putting their family and social lives first). The older accountant questioned the raise that was given to the younger person who was considered a high performer, saying he did not need the raise, as he was single. The American management concluded that the principles the Dutch were applying – that education, age, marital status and financial need should have more of an influence on salary level – contradicted the American principle that people should be rewarded after demonstrating their accomplishments. These examples seem to reflect a higher ascription versus achievement orientation in Trompenaars’ (1993) terms when comparing Dutch management culture with American culture. American management culture (see Chapter 3) stresses status and reward based on achievement. A more ascriptive culture will base reward and status on who you are and where you come from, your educational diplomas, and seniority in the organization (see also the Japanese model in Chapter 5). These examples may also reflect a higher level of femininity in Hofstede’s terms for the Dutch personnel, for whom work does not have such a high centrality as it does for their American counterparts, for whom family and outside-the-work situation is important, and high achievement is not such a priority. Different cultures respond differently to the relationship (and often contradiction) between the world of work and the world outside work, as was

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discussed in the Introduction. Some cultures blend the two, yet in different ways: American culture in terms of a contractual relationship with high priority given to achievement in work, in respect not just of monetary reward, but also of status within society (Chapter 3); Japanese culture in terms of capturing the wider collectivist societal culture in corporate obligatory relationships, again making work central, but blending it more completely with life outside work. The Dutch approach may be similar to the Swedish discussed in Chapter 1, which ensures that a lower position is given to the world of work, and where shows of high achievement are frowned upon; in a way, this forms a protection (overtly, in good social security arrangements) against work life encroaching too heavily on the ‘real’ world of social and family life. Yet there does not seem to be a contradiction between a more ‘feminine’ (Hofstede, 1980a) attitude towards the world of work, and a highly enterprising and successful (in both economic and social terms as was seen above) society, and one which seems to have worked actively to encourage the missionary spirit, and enterprise outside its borders.

Royal Dutch/Shell Shell is an unusual company. Whether or not it is a typical ‘Dutch’ company is difficult to say. This is because it is both Dutch and British, and possibly just a bit American. It is a product of an alliance between the Royal Dutch Petroleum Company of the Netherlands and Shell Transport and Trading Company of Britain formed in 1907. The two parent companies have retained their legal identities, so that shareholders do not have shares in ‘Shell’ but in either one or the other of the companies. These two listed companies own the stock of three group holding companies in a ratio of 60 per cent by the Dutch and 40 per cent by the British. The holding companies are Shell Petroleum Company Ltd (UK), Shell Petroleum NV (The Netherlands) and Shell Petroleum Inc. (USA). The group holding companies own controlling shares in about 270 operating companies in 130 countries, and interests in another 1,500 companies worldwide (Hendry, 2000). Shell forms one of the world’s largest multinational companies, with over 100,000 staff and a total asset value of $110,068 million. Its two central offices are in London and The Hague (Mahieu, 2001). Its traditional operating structure has been a functional/regional matrix devised by McKinsey in the 1950s. This was replaced by a simpler functional structure in 1996, which was intended to focus more on core activities and to speed up decision making. Throughout the 1990s the operating companies enjoyed much autonomy, with the head office providing long-range strategy and career management functions (Hendry, 2000). Mahieu (2001) argues that the business environment in which Shell has always operated has shaped the approach to developing managers. It has been characterized by a growing demand for energy that has fuelled economic growth. Business ventures in this industry are long term oriented. They favour capitalintensive, large-scale undertakings, which are global in scope. High-calibre professional people at ground level manage them. Hence a global outlook, a longterm orientation and a notion of a career-long employment and development of expatriates and local staff have become the main characteristics of Shell’s approach.

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Shell has always taken people in from university, and ‘grown their own timber’ by providing technical, professional and management development opportunities. This has involved moving people through the organization every few years, and providing them with assignments of increasing complexity and scope to test their general management and leadership capacities. This basic philosophy still exists, but Shell also recruits more senior people directly into the company. At all levels, it is understood that people are moved to a new position and new challenge after a few years, to create a ‘flux culture’ and conditions under which people are expected to grow (Mahieu, 2001). The first two assignments for people joining from university would be designed to provide a grounding and develop a professional competence in a particular functional discipline. This would then be expanded across cultural boundaries for high potential people. Shell has maintained an expatriate staff of some 5,000–6,000. This has offered a great many learning opportunities for the staff involved, as well as transferring knowledge across the group. Following the foundation of professional expertise, this would be supplemented by crossfunctional experience to broaden perspectives, with a view to reaching a person’s ultimate potential by the age of 50. Throughout the organization Shell has used a set of common criteria for job evaluation and grading, and to identify the strengths and weaknesses of people. This was encapsulated in a common set of broad competences: ‘helicopter’, ‘power of analysis’, ‘imagination’, ‘sense of reality’, and ‘leadership effectiveness’. ‘Helicopter’ is a now-famous Shell competence that was introduced into the company by Professor van Lennep of the University of Utrecht and incorporated into an appraisal framework by a Shell executive, M. Muller. It was described as ‘the ability to look at problems from a high vantage point and shape the work accordingly on the basis of a personal vision as well as the urge and the ability to place facts and problems within the broader context, by immediately detecting relevant relationships with systems of wider scope’ (reported by Mahieu, 2001). Staff appraisal was based on these broad competences, forming an estimate of a person’s potential. This was expressed as a job level that they were expected to reach towards the end of their career. Yet there was flexibility that allowed the ordering of the importance of these different broad competences to differ between countries. So, ‘reality’ was valued highest in the Netherlands, ‘imagination’ in France, ‘leadership’ in Germany, and ‘helicopter’ in Britain (see Trompenaars, 1993: 175). Decisions about the allocation of assignments were taken by assessing a person’s potential and development needs, in relation to the needs of the organization. Competences needed to fulfil an assignment were assessed in relation to the people available. Promotion guidelines were used to determine how long someone should stay in their current job, and when it was time to move on. Analysis was used to predict people’s development and movement over time (supply) and compare this with the number of jobs at different levels that would become available (demand). This was used to inform recruitment and resourcing decisions. This approach based on the use of potential, promotion guidelines and supply and demand analysis worked well for Shell, a company which was able to focus on the long term, where the demand for talent was based on a fairly stable situation, and which had a relatively closed system of staffing, employing people

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directly from university and growing them internally until they reached their ultimate potential. However, towards the mid-1990s circumstances and thinking were beginning to change.

Why expatriation? A strategic perspective Here, the various issues of expatriation are reviewed, in order to look more closely at the problems and perspectives that they raise. The analogy of the missionary has been used because quite often, like the missionary, the expatriate goes abroad in order to fulfil the needs of the parent organization to introduce methods of working, new technology or marketing methods, and sometimes to propagate corporate culture (the way we do things around here), as was seen in IKEA and to an extent also in Shell. Like the missionary, the expatriate is preaching a message. When this message is taken directly from the home country and implanted in the host country, management techniques and methods may result which are inappropriate to the host culture. The problems of this occurring, and why it might occur have been discussed already in Chapters 1 (the multicultural model) and 3 (the American model). Like the message of the missionary, this may well address a problem of the human condition (e.g. in the corporate world, the need for higher productivity) and may be sought avidly, but its subsequent adoption may be inappropriate. Adapting principles to the local conditions may be one way of doing things, as with Shell’s broad competences, but the cultural values on which principles are based may be quite different, as in the case of Manners Europe.

The reasons for expatriation Expatriation can be looked at as a way of fulfilling the strategic requirements of the organization; as part of the career planning process of the company; and as meeting the needs of individuals in their career aspiration.

Fulfilling the strategic needs of the organization These strategic considerations were examined in Chapter 2, by reference to Perlmutter’s and others’ models of international strategy. Hence, within ethnocentric organizations expatriates from the parent company manage subsidiaries. This may be regarded as the highest level of missionary work (taking the message to the subsidiary) and often occurs at the early stages in the development of international organization, although IKEA displays many features of this. It is often a good place to be from the perspective of an individual who wishes to pursue an expatriate career: but only within the home company and not the host country. In the polycentric organizations locals manage subsidiaries. Hence there are few expatriate assignments. Although this may help to facilitate political integration and acceptability of the company in the host country, it provides a low control for the home company and is a poor environment in which to build an expatriate career. Crédit Lyonnais, discussed in Chapter 2, exhibits many features of this approach. A regiocentric organization provides good opportunities for expatriate careers within a specific

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region such as Europe and like the geocentric organization is staffed without regard to the expatriates’ nationalities. Shell may well be a good example of a geocentric approach.

Being part of the career planning process of the company Career planning is important to both manager and key employee and to the organization for which they work, for the following reasons (Jackson, 1993c): • Employee loyalty: if an organization has a good career programme, then good and ambitious employees can be retained. • Avoiding future shock: an organization should be prepared for the future; there is a need for both individuals and the organization as a whole to ‘learn to learn’. This is all part of a good career programme. • Performance motivation: knowing the context of your job is a good motivator. Even though the current job may be uninteresting to you in its own right, a planned career puts it into perspective. • Integrating objectives: a good career programme should integrate the needs and objectives of the organization in its future development, with the needs and aspirations of individuals. Often if the two sets of objectives do not meet, then the individual may leave for another organization which better matches his or her aspirations, or if the organization retains large numbers of individuals working at variance with the organization’s objectives, this may have a negative effect on organizational performance.

Meeting individuals’ career aspirations Not only do managers as individuals have a responsibility for their own career development, they also have a key role to play in the organization in respect of other people’s careers. Managers and key employees (undoubtedly in an individualist, but not necessarily in a collectivist culture: see discussion below) therefore should: • include career development within the performance appraisal and review process: to develop people a manager needs to unify the person’s career path, their current job, performance appraisal and the feedback they provide; • facilitate job experience and training to fulfil an individual’s career plan: this encourages motivation as well as developing the individual and the organization for the future. Yet although expatriation may be a factor of the strategic arrangements of internationalization and career planning within the organization, much of the literature suggests that expatriation is not straightforward.

Is expatriation problematic? 86

Hiltrop and Janssens (1990) assert that the demand for expatriates is increasing as a result of a rapid growth of multinational companies and international joint

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ventures, and as expatriates meet the needs of the parent company to implement corporate strategy or supply a skill or knowledge which is not available locally. However, expatriates are expensive to employ as the cost of additional allowances and redeployment increases the base salary by 25–100 per cent. In addition, expatriate assignments present expatriates and their families with a number of difficulties and challenges. The causes of these problems of transfer anxiety, culture shock, social dislocation, adaptation, and feelings of abandonment often may be traced to a combination of cultural, political, economic and legal differences. Hiltrop and Janssens also assert that failure rates are high. This is a typical claim within the literature, and this particular work can perhaps be used as an example. They point to a study of Swedish expatriates numbering 639 in 26 different countries. This showed that 25 per cent returned home before the end of the assignment, giving cultural adaptation problems as the highest reason, sometimes manifested in traumatic reactions such as insomnia. They also suggest that US studies have shown even higher failure rates, with 50 per cent not completing assignments in ‘developed’ countries and up to 70 per cent not completing in ‘developing’ countries. This of course adds to the expense of expatriation, as premature repatriation is costly both to the company and to the expatriate. This is mainly as a result of the wastage of relocation and training expenses already paid (at the time of writing some US$55,000–100,000 per expatriate). The psychological costs of failure, as well as possible cost to career progression, may also be substantial to the expatriate. Harzing (1995), another Dutch academic, challenges this widely accepted wisdom. She states that there is no empirical foundation for the existence of high failure rates when measured as premature re-entry. This is a persistent myth which seems to be founded on a massive misquotation in the literature of three articles, only one of which shows empirical evidence of expatriate failure rates, and this evidence shows them to be rather low (Tung, 1981). She also posits that rather than premature re-entry being a measure of failure, it may be that that those who stay on in their assignments and perform inadequately are more damaging to their organization. At the personal level, failure might be more pronounced for the expatriate returning home after a seemly successful assignment, but having much larger problems readjusting to the home organization and the home culture. Hiltrop and Janssens’ (1990) article refers to Desatnick and Bennett (1978) who, although stating those high figures for American expatriates, do not substantiate them in any way, and do not give their source. Hiltrop and Janssens refer to a Swedish study by Torbiörn (1982), which does appear to be a legitimate study, but is only one study referring only to Swedish expatriates, and is not widely quoted in the literature. Harzing’s (1995) view is that these references do not provide the grounds for assuming a high failure rate. Indeed, Tung’s (1981) study indicates that American expatriate recall rates are higher than European and Japanese rates: 76 per cent of the American multinationals had recall rates above 10; but only 3 per cent of European firms and 14 per cent of Japanese multinationals. In fact, Harzing remarks, very few companies in Tung’s study had recall rates of more than 20 per cent. To this Harzing (1995) adds that over the years companies should have learned from their mistakes and should now have recall rates considerably lower than this. In the absence of any substantial empirical research on this, Brewster’s

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study of 25 Western European companies in 1988 showed that 72 per cent had failure rates of less than 5 per cent (cited in Brewster, 1991). Hamill’s (1989) study of seven British firms indicated expatriate failure at less than 5 per cent, and Scullion’s (1991) survey of 40 British and five Irish companies found only 10 per cent had failure rates above 5 per cent. This is an area that needs far more empirical investigation.

Choosing expatriates In order to make sure that expatriates’ assignments are as successful as possible, companies need a means of selecting people who are likely to succeed. There is evidence that at least Anglo-Saxon companies rely heavily on the competences approach (see also Chapter 3) to select people, although as in the case of Shell, selection may be from a pool of previously identified ‘high-flyers’. Phatak (1992) lists nine skills that (presumably American) companies look for when selecting their international managers: • technical ability: the ability to do the job is of course a prerequisite; • managerial skills: those skills which are associated with being an effective manager are important; • cultural empathy: sensitivity to other cultures and a non-judgmental understanding of other cultures is probably essential; • adaptability and flexibility: this includes the ability to integrate with other people and other cultures and different types of business operations; being adaptable to change; having the ability to solve problems within different frameworks; sensitivity to differences in different cultural situations; and flexibility to manage a continuous operation despite gaps in information and assistance; • diplomatic skills: an ability to deal with others, negotiate and to represent the parent company on foreign assignment; this may even involve interaction with politicians and government officials in some developing countries; • language aptitude: the ability to learn a language quickly is a useful attribute; • personal motives: a positive reason for wanting to take on foreign assignments; • emotional stability and maturity: this involves having the staying power and emotional maturity to maintain equilibrium in a foreign environment as well as being non-judgmental in relationships with others; • adaptability of family: this factor is crucial to the success of a foreign assignment, because if the family get homesick or they simply are unhappy in the foreign environment, this may lead to low performance and other problems for the international manager. Similar factors are outlined by Dowling and Schuler (1990) as follows:

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• Job factors: • technical ability • managerial skills

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• administrative abilities • knowledge of host country and headquarters operations • Relational dimensions: • tolerance of ambiguity • behaviour flexibility • being non-judgmental • cultural empathy and low ethnocentrism • interpersonal skills • Motivation: • belief in the mission • congruence with career plan • interest in overseas experience • interest in the specific host country • willingness to learn new attitudes and behaviour patterns • Family situation: • spouse willing to live abroad • adaptive and supportive spouse • stable marriage • Language skills: • knowledge of host country language • understanding of non-verbal communication Yet Deller (1997) decries the overuse and over-quoting of lists such as this. Often their construction is based on impressionistic criteria. The extent to which these selection criteria can be generalized to other cultures is much under-researched and is normally not considered in otherwise perfectly competent critiques and studies such as Deller’s. The extent to which East Asian, South Asian or African companies, for example, use these or different sets of criteria in selecting expatriate staff, and the alternative approaches used other than a competences-based one, still need to be investigated.

Acculturation Once selected, the level of acculturation in the foreign assignment may well determine the level of success of expatriates. Mendenhall and Oddou (1985) point to four dimensions that relate to successful expatriate acculturation: self-oriented dimension, other-oriented dimension, perceptual dimension and cultural toughness dimension.

Self-oriented dimension This relates to those activities that serve to strengthen self-esteem, self-confidence and mental hygiene. The dimension contains three sub-factors: • reinforcement substitution: replacing activities which bring pleasure and happiness in the home culture with similar but different activities in the host

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culture (e.g. art, sport, cuisine, music), that is, learning to enjoy a parallel activity in the host culture; • stress reduction: managing stress through adaptation and creating ‘stability zones’ (e.g. through meditation, writing a diary, pastimes, religion) which can be retreated to, in order to develop a rhythm of engagement with the host culture and withdrawal from it; • technical competence: being able to accomplish the objectives of the assignment by employing technical abilities for the job.

Others-oriented dimension This relates to activities and attributes which enhance the expatriate’s ability to interact effectively with host nationals. This dimension contains two sub-factors: • relationship development: the ability to develop long-lasting friendships (e.g. mentor relatonships); • willingness to communicate: including the willingness to use the host language (rather than fluency in the language), and involving observation, listening, experimentation and risk taking, and active participation.

Perceptual dimension This relates to the ability to understand why foreigners behave the way they do. It involves being non-judgmental and non-evaluative. While not reflected in classic competences, it may be possible to provide training to develop people’s awareness.

Cultural toughness dimension This is based on the assumption that some cultures are more difficult to adapt to as they are more different than other cultures from one’s own.

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Tung (1981) proposes a selection-decision process that includes variables in the nature of the assignment of task or relationship emphasis, and in the difference or similarity between the host culture and the home culture. Hence, if the two cultures are highly diverse, and there is an emphasis on relationship variables (for example a customer focused job), then a highly rigorous orientation process will be necessary. If the two cultures are quite similar, and the emphasis is on task variables (for example a highly technical job), then a less rigorous orientation process is sufficient. Although there may be a case for cultural-specific training, addressing the dimensions identified by Mendenhall and Oddou (1985), and the variables of Tung (1981) may be part of a cultural-general approach to development that equips managers and key staff to be flexible across cultures. Alternatively, this process may be seen as simply part of the management learning and development process where expatriation is not seen as an add-on, but as an integral part of developing effective managers, as seems to be the case in Shell (Mahieu, 2001) but not necessarily in a company like Crédit Lyonnais (see Chapter 2).

THE MISSIONARY ORGANIZATION

Why expatriation? The career perspective International career planning is relevant not only to the organization, but also to the individual. Stewart (1986) describes career-planning strategies as akin to drawing road maps: • career goals: the starting point is deciding where you want to go; • career path planning: secondly, you have to decide how you want to get there, as there are alternative routes; • training and job experience: you need to acquire the skills and knowledge to get where you want to go, and for when you get there; • ongoing assessment: at any one time you need to know how far you have come, how far to go, and what else you will need to get there. Of course, people adopt different strategies and career patterns based on a number of assumptions, some of which are derived from their cultural background. We can outline three different possibilities: • Chance: you may rely on pure chance to provide the right job at the right time. The degree to which events are left to chance or fate may vary from one culture to another, for example between ‘developed’ and ‘developing’ countries (Jaeger and Kanungo, 1990). • The company will take care of your career: In this type of strategy you rely on the organization to provide the right opportunities. This can work in a paternalistic company. For example, a belief that the company will provide may be implicit in a Japanese company. To use this strategy in a Western paternalistic company, perhaps you need to be able to ‘sell yourself’ within the company, to make sure that you are noticed! • Self-designed: This is considered the ideal in the more individualistic cultures of North America and Western Europe. Following this type of strategy, you are more likely to be motivated and a high performer. You will have a clear idea of your personal goals, skills and motivation. You will also know how to prepare for the next step in your career and will be able to balance the personal costs and benefits involved. Specific studies relate to why expatriates choose or do not choose international assignments. Adler (1991) surveyed 1,129 MBA students in business schools in the United States, Canada and Europe in order to determine reasons why they would accept international assignments, and why they would not (Table 4.1) However, the career choices that a